It is rational to say that it is best to leave more cash in your pocket, to cover your wallet and wait for the recovery cycle.
Don’t look at the modern economy as complicated, but it’s called “production” and “consumption.”
But in the end it’s “consumption.”
Production is due to demand.
And consumption is the end-end demand.
So consumption is the ultimate engine of economic development.
For one country, production to satisfy consumption in another country is called an export-oriented economy.
A range of infrastructure, such as factories, ports, transport, etc., built to satisfy exports, and the resulting urbanization, is called the investment economy.
When growth is stagnating in other countries, demand is falling, or when they feel insecure about external supply chains, they demand a return to their industries.
There must then be sufficient demand for consumption within exporting countries to catch up with these capacities.
It’s called “the domestic demand-driven economy.”
The so-called East Asian model follows that path.
Among the troikas that drive the economy, the role of the head is in turn played by exports, investment and domestic demand.
In 2021, consumption contributed 65.4 per cent of GDP growth in emerging countries.
So a downscaling of consumption means not only that people are reluctant to spend money, but also that the economy is going to have big problems.
If everyone’s capacity and willingness to consume is declining.
How do you pull the inside?
How do you turn “inner circulation”?
Then there was overproduction, layoffs in factories, increased unemployment, falling incomes and further consumption…
Many experts tend to ask questions about the mindset of young people and criticize them as if the problem would disappear as long as the perception of young people was reversed and there was no need to reform distribution mechanisms.
This clearly ignores the structural problems of the economy and fails to see the global recession spiral.
In this spiral, the downscaling of consumption is not only a matter of consumption, but also of mindset.
It’s a spiral system that’s one-ringed, causal and mutually reinforcing:
We are all ordinary people who are held hostage by the tide of times.
On the one hand, it is important to see as much as possible the flow of macro-trends and to make pro-cyclical decisions so as to avoid being dragged into the pit by the “scrambling” approach.
On the other hand, it is important to see changes in the market and the consumer population.
Then you’ll know what to do with the recessionary business and what to do.
It’s better to have warmed up before the cold comes.
Whether you’re trying to heat up the consumption, or whether you want to know what it’ll do to keep the world cool, you have to know how it cools first, right?
Some say it was caused by the black swan incident, such as an outbreak, and exposure consumption was blocked.
The Russian-Uu war, for example, has led to a dramatic increase in energy and food prices, which has led to a decline in global demand.
But the epidemic and the Russian-Ukrainian war are just the trigger.
The real problem lies in the economic structure.
Even without an epidemic and without war, there are other black swans that light up the crisis.
Objectively, the world is at the end of a long debt cycle.
The symptoms of this cycle are many, the most prominent being two:
One is the expansion of debt, so the currency can’t be overstretched and liquidity can turn to contraction;
The second is the end of the borrowing cycle and the onset of the repayment cycle, which has reduced consumption in order to service the debt.
With regard to the logic that currency cannot be overstretched, I have explained the effect of “debt servicing cycles” on consumption.
The characteristic of the life cycle of debt is that you’re good to me when you borrow; you’re miserable to me when you pay.
Dario’s video-image ” How the Economic Machine works ” gives us the following views:
1) The economy consists of numerous transactions;
2) In a transaction, the expenditure of one person is the income of another person;
3) When you borrow, your ability to spend is significantly increased and others can earn more;
4) That is why the economy is spiralling up its borrowing cycle, increasing its debt, increasing consumption and income;
5) The loan seems to come from the bank, actually from the future itself – – When the debt is due, you must reduce the expenses to service the debt;
6) In the repayment cycle, as you reduce expenditure, others reduce income;
(7) The economy is thus spiraling downwards, income and consumption.
Such cycles are unavoidable, and the process of decline will not be so smooth, because there is a significant proportion of people who do not compress their consumption to repay their debts, but to default.
Because of the rising cycle, asset prices are high as debt expands.
However, by the time of the decline, the prices and volume of transactions had declined.
However, debt has not declined.
Many people, even if they sell their houses to reduce their consumption, still do not pay their debts and are bound to default.
Many cases of non-compliance are called debt crises.
The process of the debt crisis has been very intense.
Because of the destruction of credit systems, no one dared to borrow money from abroad and no one dared to invest, the market could contract sharply.
So it is not a mild and slow process of “compressed consumption to pay off debt”, but rather an intense and short-term process of “debts and assets together.”
Why does the modern economy like to increase money to solve problems?
The economist Machi once told such a story:
A short-term student went to the hotel and took out a dozen silver coins, picked out the best room in the hotel for 10 taels of silver. The owner immediately used it to pay the debt to the rice store next door, the owner turned to the butcher’s office to pay the meat money, the butcher immediately paid for the food on credit, and the feeder went to the hotel to pay the rent.
That’s it. It’s back to the owner.
It’s time for the book to say the room wasn’t right.
Look, the owner didn’t make a penny, but everyone paid off their debts. What’s the story?
The economy is not money, it’s money!
In the modern economy, who has taken on the role of a student in injecting liquidity into the market?
Bank!
The bank lent the money to the hotel owner, who turned around and returned the money to the bank. The money on the market was neither increased nor inflation, but the debt was actually settled.
The theoretically feasible, in reality, is completely different, as the money is not paid to the hotel owner.
From the bank ‘ s perspective, the hotel owner is untrustworthy of the debt, so he prefers to give the money to the landlord, who owns the land, which is the bank ‘ s favorite asset.
The landlord gets the money, goes to the house, it’s getting more expensive, and the booksellers have only one or two silver travel budgets to buy the house…
This is the case, where money does go a lot more, but only between banks and landlords.
Even worse, the student’s money has been sucked away by the landowners’ bank, and there’s no money going into the hotel, the rice dealer, the meat shop, the hotel…
This explains why the M2 figure is large, but the market still lacks money, because only the money that flows helps the economy.
What’s the problem?
If you don’t give the money to the person who should.
So some Western countries, bypassing the banking system and sending money directly to the people, are useful and do not have the effect of “all the money is no money.”
Most of the financial flows generated by the middle and lower classes are in the area of consumption.
Of course, it’s useful to issue consumer coupons.
The problem is that when there’s no money, there’s no money.
For example, it’s either to encourage “the economy” or to call for “the economy of the trunk.”
The effect, you know.
The lack of consumption is not due to lack of consumption.
It’s lack of money, lack of will, lack of confidence…
If you don’t, you can put the house price down and let the “bookboys” clear the budget, go to the store, buy rice, buy meat…
But the house price won’t hold, and so many people wait for it.
So the inner cycle won’t move.
If it does not move, the recession will inevitably deepen the spread and eventually lead to a crisis.
Because of the existence of a debt cycle, the economic crisis has been characterized by debt-intensive defaults and financial crises that have hit credit systems.
Before the debt cycle was invented, however, the economic crisis was manifested in excess production.
Marx, summing up the economic crisis: absolute surplus versus relative deprivation.
What do you mean, absolutely surplus?
The production of goods, such as milk, can’t be sold, and tens of millions of university graduates can just lie flat, which is an absolute surplus.
What do you mean by relative scarcity?
The rich have ample purchasing power, yet demand has been oversatisfied, and the poor have large needs but lack purchasing power.
This is illustrated by a highly simplified example:
Assuming a wine factory produces 100 bottles of wine at a price of 100.
The liquor store’s turnover is 10000.
Capitalists pay workers 2,500 wages and purchase costs to farmers who produce raw materials 2,500, leaving a profit of 5,000.
Worker+farmer can consume 50 bottles of wine because it’s 5000.
The director has a consumption capacity of 5,000, but has a limited belly and can only drink 10 bottles of wine.
In other words, you can only consume 60 bottles of wine, and then you can’t sell 40 bottles.
If you can’t sell it, you have to cut investment, cut staff, cut production…
In short, the rich have more income, but the needs have been overmet.
There is a desire to consume, but too little income and insufficient capacity to consume.
This is the story of the film “The Big Rich of West Red City.”
The wealthiest money, however luxurious it may be, can’t be spent enough.
The consumption needs of the vast majority of ordinary people in reality are simply not being met and are being suppressed.
In other words, what we see is a “consumption downgrade”, which is actually a mirror of “overproduction”, which is essentially an economic crisis.
Let’s assume another scenario:
If the worker’s wage is 4500, so is the farmer’s wage 4500, and the capital profit is 1,000.
So the workers farmers together consume 90 bottles of wine and the capitalists still consume 10 bottles of wine.
See? As a result, there would be no excess production and the consumption needs of hit workers would be more met.
45+45+10 > 25+25+10, what does that mean?
“Community of Wealth” leads to consumption that is greater than “Before Rich.”
This logic is real in reality.
During the outbreak, many people said that money was hard to earn and that it was expected to be pessimistic, but consumption by the rich had not actually been affected.
For example, expensive horsey bikes, sold out in minutes.
Bene, the world ‘ s top three consulting firm, published a Luxury Market Report 2021, which states:
Global sales of luxury goods have weakened as a result of the epidemic, yet the market for luxury goods in developing countries has risen in reverse.
In 2021, the size of the Asian personal luxury market doubled compared to 2019 and is expected to be the world ‘ s largest luxury market by 2025.
But the reality is that the rich, no matter how luxuriant, cannot afford the economy and ultimately look at the large middle and lower classes.
Imagine an extreme scenario, assuming that a region, except for the richest, is all poor.
The first is worth hundreds of billions of dollars, and 70 per cent of the income of the poor is used to pay off the debt.
What would you do if you were the richest in this situation?
Would you invest in a mall?
Will you upgrade the industrial chain to produce something higher?
You won’t!
Because you’ve seen the purchasing power of the market — the poor can’t afford your things.
You will control them only through debt, so that they will never cease to produce what they cannot consume, and that they will not feed the humans.
And then you’re going to invest in overseas, where there’s potential for consumption.
These two bottom logics are seen above in the context of debt cycles and overproduction.
The structural problems of the economy, as reflected in the decline in consumption, can be summed up in one sentence — debt flows to the majority and wealth to a few.
Once this structure enters its next cycle, it will form a “negative spiral” that cannot be removed without destroying it.
What do you mean “negative spiral”?
For example, when I saw the King getting balder, I asked him, “Why is he balder?” I’m sorry.
He said, “Because I have anxiety every day. I’m sorry.
“What’s the anxiety? I’m sorry.
“The anxiety is getting balder! I’m sorry.
Anxious, bald, more anxious, bald…
Such links are cause and effect and are called negative spirals in the direction of a downward spiral of negative results.
A little higher, a more complex example, for example, why is it difficult for the poor to get out of poverty?
The Professor of Behaviour Economics at Harvard University, Cedhill, and the Professor of Psychology at Princeton University, Elde, say so in Drift:
The poor have no money, and if they do not work today, they are likely to have no food to eat; if they do not work this month, the next month’s school fees will not be paid, so that the lives of the poor will remain pressing, creating a short-sighted phenomenon known as the “basket effect”, which narrows their horizons and neglects what might save them from poverty.
This negative spiral is: poverty, urgency, neglect of what can be rich, poverty…
The poor had no money, so every penny had to be weighed, which placed a mental burden on them.
The cost-saving mentality can deplete attention and lead to a mind being dominated by triviality, leaving the poor with a lack of spare time, which in turn has a peeping effect and prevents long-term planning.
In other words, the poor lack not just money, but spare time and intellectual bandwidth, and then one of the negative cycles of poverty is the scarcity of resources, the scarcity of resources, and the scarcity of resources.
The book The Nature of Poverty also describes poverty as “the trap of a negative cycle”: material deprivation, seduction, timely enjoyment, material deprivation…
If these negative spirals are not broken, the poor will remain impoverished, like a vortex of death, struggling to get deeper and deeper in suffering.
To find a way to break this spiral, you have to jump out of the spiral, look over the system from a higher dimension, instead of staring at a link, and it’s just a left right, stuck in the spiral.
For example, we usually think that poverty is a lack of money, so many of the pro-poor projects pay directly, but the money is spent and the money goes back.
The only way out of the “poverty = lack of money” is to see the whole “frequent spiral” — the poor not only lack the money, but also have the mental bandwidth and good long-term planning to cope with life.
In other words, social security, basic education, public health care and employment opportunities are the only real measures that can lift the poor out of poverty.
An understanding of the negative spiral reveals that the downscaling of consumption reflects problems that have been pushed forward by the debt crisis and the polarization between rich and poor.
The push was to anticipate pessimism and lack of confidence.
They are not a separate issue, but a causal and mutually reinforcing relationship.
So what’s the conclusion?
The conclusion is that only by improving the economic structure of debt to the majority and of wealth to a few can consumption heat up, otherwise it will continue to cool down.
It’s probably going to keep cooling, so we’re gonna have to prepare for the cold.
First of all, we need to realize that when the economic cycle moves into a “negative spiral” state, people’s mentalities change dramatically, and many of the consumption patterns that we used to practice in the past are repulsed.
The second is that these changes also lead to new consumption patterns, and our business strategies and marketing strategies need to adapt to these changes.
We talk the same way.
As the economic cycle goes up, debt expansion increases both consumption and income, and what is felt is that it is easy to earn money and that up-to-date inflation is diluting debt.
As a result, there are good expectations about the future, with rising incomes, rising housing prices, declining currencies, diminishing debt, and more aggressive borrowing and consumption.
In parallel with the expansion of debt, capitalism invented “consumerism” , which not only lends to you, makes you rich and spend, but also washes your brain and consumes your brain.
The word “delayed satisfaction” in psychology, consumerism?
It doesn’t dare, it wants you to be satisfied.
For example, our generation has heard stories of an old Chinese wife and an old American woman meeting in heaven.
The old lady of China said that I had finally saved enough money to buy a house, but I was dead, and the old lady of the United States said that I had finally finished my mortgage before I died.
Does that make sense?
But when the truth is taken into account, it changes, because human desire is unlimited, but the amount of debt is limited.
The one who sells the house, tells you to buy the breakfast, sells the car, tells you to buy the breakfast, sells the phone, still tells you to buy the breakfast…
They do not care how many times you’ve been buying it, but they only preach it.
And you, the newly listed cell phone, $600,000, you squeezed the 1,000 in your hand, which would only be hateful to leave, but he told you that it could be divided into 600 a month, equivalent to 20 an hour or less…
What’s the difference between a split and a free ride? When you think of it, you’ll have an internal climax. There’s no reason to know the truth about the debt.
It’s this logic that modern society is making online payments and people’s faces pay more and more easily, so that you can move your fingers and spend it instead of thinking.
However, at the time of the debt-servicing cycle, the pain of debt oppression was enough to calm down a man who was so hungry.
You thought you would increase your earnings, and now you find it precarious.
You once thought it was a hitchhiking, a currency dividend, and now you find it a debt trap;
You look at a bunch of things you can buy, and you get a rush payment reminder, and you’re thinking.
“If only I hadn’t bought those! I’m sorry.
“Assumption of that commodity, I’m much more aggressive? I’m sorry.
“Why are the values that people seek when they are high in consumption, often outside the commodity? Milk tea is to catch up, to watch the scenery is to play cards…”
It’s hard to look back once you start thinking about these issues.
This is followed by ideas of “extreme simplisticism”, “low-fitting life”, “saving money” and so forth, which are being spread among young people.
When one or two don’t spend money, will he talk about money-saving?
He won’t. He’s sorry about poverty.
When a group of people doesn’t have the money to spend, they evolve a whole ideology that rationalizes “no money, no money.”
Gradually, people will decompose the meaning of consumption behaviour, moving from high to cold consumption.
There are two well-known discussion groups in one of the petals, a group called the Alliance of Debtlords, all of which are networked friends who are trapped in Internet lending because of past consumption, and who come together to oversee and inspire each other.
The other one is the Mad Hollows, a group that beats consumerism, and whoever wants to buy something, posts it in the group to wake himself up, to save money for madness.
They are also happy because of the human nature of hoarding and collecting, which produces a strong sense of satisfaction, and the manufacture of dopamine is the same as the consumption of impulses.
In the inner world, while some young people lie on the ground, others choose to escape the control of the disciplined society by seeing the truth about its functioning.
They see the meaning of the vast majority of consumption activities, thus turning their attention away from the material world to their inner world, focusing only on the core, the basic, the most self-sufficient, and in exchange for material streamlining for spiritual enrichment.
Less is More, Less is consumption, More is mind bandwidth.
This trend, to some extent, has led to a reversal of the pre-existing consumption scene, with most of the booms in those markets becoming bubbles after the tide.
Even the red economy and the consumption of the blind boxes can be silenced and left out of the memory of the Internet.
From a business point of view, we need to respond to this trend by reducing investment in non-required goods and services.
Those who play small games, which cannot be said to be completely unmarketed, will surely be less and less incremental, and you will have to make “cheap and big bowls” to be more popular.
In Japan, for example, it was in such an environment that the foreign forces had erupted.
Here are just a few examples of the mental reversals that have occurred during the Great Depression in the United States:
1) To return to the extended family, because of the need to save money, many young people will return to live with their parents.
2) Anti-urbanization as employment opportunities in large cities are reduced and the cost of living in rural areas is lower.
3) Social activities are reduced because of the fact that when the workplace is not well, the “social currency” is sharply reduced, and people feel that their social value is declining, thus resisting socialization.
(4) Social conflicts have increased and security has decreased. So we often remind ourselves and our friends around us of the need to be polite and modest in dealing with flexible workers, because you don’t know what he’s been through, or perhaps the last straw to collapse.
5. Gambling and fraud are prevalent. Many people lost a great deal of wealth in the collapse of their assets as a result of the debt crisis, and some of them, who felt lucky, bred a “turn-to-back” and were eager to become rich by taking a “cut-off” approach.
It is natural that all kinds of hoaxes based on this kind of mind do so.
6. Religious activities are prevalent. Because of the lack of security and certainty about the future, there is often a sense of emptiness, confusion and anxiety, and religious organizations take advantage of this spiritual need to expand their influence.
Looking at the actual situation around us, it is depression per capita, mental intensities per capita, which gives rise to a great deal of emotional need and psychological counselling.
7) The need for paralysis is on the rise. In his book Glory and Dreams, historian William Manchester recorded the true scene of the Great Depression in the United States: “The lives of millions of people can only be saved from death if they live like animals…”
When light is not seen, closed eyes are, in fact, a necessary self-protection, so there is an increased demand for addictive consumption of nipples, alcohol, tobacco and games.
8. The demand for knowledge payments will increase. On the one hand, because it is too difficult to find a job, people want to improve themselves and become more competitive;
On the other hand, it’s giving itself a “positive feeling” of progress in order to comfort myself with anxiety.
Thus, during the downside of the economy, there will be a significant increase in demand for such services as libraries, knowledge payments and skills training.
Above all, it is hoped that people will be able to adapt their products and services flexibly to new trends in response to changes in the mindset and mental needs of people during the economic downturn.
From the point of view of individual consumption behaviour, you have to know that you cannot counter trends, not that you consume more and advocate more, and that the consumption environment improves.
Indeed, the situation will never improve as long as the economic structure remains unchanged.
It is rational to say that it is best to leave more cash in your pocket, to cover your wallet and wait for the recovery cycle.
For quite some time now, there has been a constant fear of inflation, with the feeling that holding cash will slowly change paper.
Even if such an approach has produced a strong inertia, it will also shift the debt-servicing cycle to the opposite direction — when one finds that debt is not always diluted, and income falls, debt is so terrible that it has more cash to feel secure and control life. Case number: YXA150Alp2pTjl3MEGxSrvrg
I don’t know.
Keep your eyes on the road.
