Wednesday, October 01, 2008

What Happened?

I’ve been listening and reading to others regarding the current economic crisis; politicians, reporters who specialize on the economy, commenters on blogs; and I wonder what universe I’m living in.
“Our economy runs on credit and it always has.”

“People won’t be able to get loans to by cars and televisions and electronics, and the economy will come to a halt. Stores will close.”

“Businesses will not be able to get a loan to buy inventory and meet payroll.”

I owned my own business for eleven years, installing machinery in manufacturing plants. I had my own equipment; I had employees; I bought supplies; and I had some inventory. I never once took out a loan to meet payroll; the idea never crossed my mind. I never took out a loan to purchase supplies or inventory. The only loans I took out were for capital equipment, and more than half of my capital equipment I bought using cash. Paying interest on loans just didn’t appeal to me.

Most of the equipment I installed was made in this country. The plants I installed them in were here, of course, and they made things. They were manufacturing plants which employed people who made products which other people bought. Those other people worked in other manufacturing plants and made other products which these workers bought.

That was twenty years ago, and now those plants are gone.

Now we have an economy that’s just based on buying things. What happened? Where did this economy of buying things and not making things come from?

My father once commented about the “service economy” which was coming into vogue, “Hell, we can’t all make a living out of selling hamburgers to each other.”

This is even worse than that. At least somebody made the hamburgers.

Nobody is making anything, and nobody is paying for the things they are buying. This is the “consumer economy.” It just consumes. What happens when it runs out of things to consume?

What happens when it runs out of money to buy things with? It uses credit. What happens when it runs out of credit?

I think we’re about to find out.

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