Overproduction and recession

A recession is when the economy shrinks. In my terms, it means that sales is lesser than the previous period.There are many reasons for sales to reduce including (and not limited to):

1. Lack of demand - where the item is no longer desirable.

2. Competitors - where someone else can meet the demand with better conditions (better item, cheaper prices, etc).

3. Oversupply - where there is too much of the item, and all those that want it already have it.

4. Overpriced - where the item is too much to expensive relative to the value derived from it.

5. Many others that you can continue with.

Given that many countries are facing (or going, or have gone) into recession (technical or otherwise), maybe we should also think of the reasons.

We were fine 2 years ago. We were fine 18 months ago, and we were still ok 12 months ago. Suddenly, when the sub-prime mortgage mess hit, everyone is affected.

Why?

So how is it that (relative to the total number of workers) some workers losing their jobs can create such a huge impact? The initial ones losing the jobs were probably overpaid non-producing people in the financial industry, involved mainly in "investment banking", "fund management", and similar important sounding businesses.

(By non-producing people, I refer to jobs that doesnt really produce a real thing, facilitate trade in a real thing, or provide service to a real need. By all means disagree if you want, it is and remains my term for those people, until someone can show me what real value these people provide to man on the street.)

I am no economist or any -ist for that matter. But it seemed to me that we cannot be growing and growing and growing. Is it reasonable to continuously have growth forever? Where will it stop? Perhaps an analogy:

1. There are people who buys houses.

2. There are developers who develops and build houses (together with the construction people).

3. More and more people go to cities to work and live, which also means less and less people in the smaller towns.

4. Developers are expected to grow every year (every year they must build and sell more houses).

5. In order to grow, developers build more houses every year.

6. Because more and more (a growing number) people are moving to the cities, more houses are required in the cities. So sales in cities grow.

7. As long as the number of people moving to cities continue to grow, there will be a growth in sales of houses.

8. As more and more people arrive, it becomes less and less attractive for new comers.

9. When the number of people moving to slows down, there should be a corresponding slow down in sales.

10. Developers panic when the growth slows in the cities,

See the problem?

A1. A developer wants to be seen as strong and NOT perceived to be in trouble.
A2. A developer that is not growing is perceived to be in trouble.
A3. In order to be seen as strong, developers must continue growing and therefore developers must build more houses.

B1. People move to cities to work and stay and will need to buy a house.
B2. Previosly the number of people moving to cities continue to increase and there were growth in sales.
B3. There are less people moving to cities now than previously and sales start to slow down.

Did we just create an economic disaster for the developer by not buying extra houses? Or did he create the disaster himself by building too many?

Of course real life is not so simple. It is further complicated by promotions, lower interest rates, speculators, etc. But the gist of it does not change. If you produce too many, it will not be sold. Of course too many means different things to different people and industries, but nontheless, there is a 'too many' for anything and anyone.

Can the unsold items be hidden? Yes. Some are perhaps not offered for sale yet, others remain uncompleted.

Can the unsold items be perceived to be "sold"? Yes. Speculators and investors that have bought but can't sell it off nor rent it out.

Can the unsold items be otherwise held? Maybe the banks own some due to loan default by developers, some are stuck in the middle of processing a loan, etc?

And of course there are those with the "For Sale/To Let" sign hanging for the past 6 months.

Let's take this to a broader context.
1. Are there brand new cars sitting around waiting for a purchaser? More than a few months worth of sales?

2. What about TV sets, washing machines, appliances?

3. Food items? Corn, wheat, apples, poultry, other meats?

4. Have we truly been so efficient that we have produced more than we can consume?

If we did, what would have been the impact?

Well, eventually, the loan taken by the developer (to build the houses) have to be paid. And the developer was hoping that the purchaser would pay him, so that he can pay the loan.

Now that the house purchaser is not there, the developer can't pay the loan, and shuts down. This means all the workers are out of a job. And these workers will not buy the new TV that they wanted. So the TV manufacturer is affected, and therefore will not buy a house, and so on.

Now that the negative cycle has started, perhaps it is time that we wake up and ask this:

Can continuous growth in production, efficiency and productivity be sustained indefinitely? Doesn't sound real, does it? Who is going to buy if you keep producing?

If not, what was it that has promoted this fallacy of permanently sustainable growth? Investors? Greed? Bad measurements from bad assumptions?

In essence, what was the measure that promoted this fantasy? Is it 'growth'?

Should we then be as engrossed, infatuated and obessed with "growth"?

Should we perhaps learn to accept that slowdowns and recessions are reasonable parts of a cycle?

Politics - enemies or opponents

1. In our democratic country, the citizens elect representatives from political parties into parliment. The citizens elect these people because they think that these people will REPRESENT the majority's opinion to the government.

2. As an extension of democracy, office bearers of political parties are also elected by its members into something akin to a management committee, often called supreme councils, executive committee, etc. Again, these committee members are elected because the members think that the elected will best REPRESENT the majority.

3. Because it is politics, there will be differences in opinion of different political parties. These differences in opinion should be because of differing views on what is the best way for the COUNTRY to go forward. That is the differences is on a subject and not mindless hatred of another human being.

To simplify, I'll use members to mean both members and citizens (members of country).

Do you think that the 3 points are or should be reasonably true? That we have elected people who we think best represent us. Best, not necessarily good, just the best of the available ones.
If the above points are true, then the opinion of the elected should be the opinion of the members or at the very least, one to protect the members. So when an elected official is elected, should he be more of a member of the country or a member of the party? Perhaps depends on the context of the opinion he is to express?

So can a member of a political party be friendly with a member of an opponent party? If not, would you have do disassociate with friends, family, business partners, etc? I remember reading somewhere that there was two siblings that are on different sides. Which I thought was very commendable.

Just to digress, I disagree with the term opposition. Opposition is to oppose, that is to do the opposite. That means if I go north, my opposition will go south. If I go east, opposition must go west. (Perhaps that is why we have some problems.) Opponent, on the other hand, does not do the opposite. They go according to where is best. If I go north, the opponent can go east, south, west, and north too! Whatever is best.

When 2 people are from different political parties, do they be enemies?

Unlike competing commercial organisations, where they fight for business, politicians must work together for the good of the country. Anything detrimental to the country must be avoided.
Is it good for the country when leaders treat a member, who attend functions of an opponent party, as an enemy?

It used to be that many love stories where told where the girl and the boy came from feuding families, families from different classes/nationalities/race/religions/etc. And these families would violently object to the relationship based on the said difference.

Well, it seems that some of us have elected more than a few representatives that feel that attending functions of an opponent party is unforgiveable disloyalty. Is that how the majority feel? If it is, then it is very scary.

Think of it. If there are 2 groups of people who are REPRESENTING the MAJORITY's opinion in Parliment, it means that what they say may be the opinion of the MAJORITY of the people.
Now, if the leaders of one of these groups (probably both) are treating the other group as enemies, would that imply that they are representing their members?

Even if their actions are not representative of the people's will, these are the perceived leaders of the country. And they are treating the opponent political party as enemies. What will their followers do? Will they follow?

Now if there are two groups of enemies representing the people, and then there may be two groups of citizen-enemies?....

Scary.

Not good university

A group of former graduates from a not-good university (NGU) runs NGU, which by the name, we can guess is not too good.

In order to maintain their pride (and delusion) of being a good university, they hire the own NGU graduates as teachers and administrators. But because they are not-good, NGU produces not-good graduates and these same graduates are now administrating and teaching. In a sense, NGU recognises this, and therefore gets the government to tell parents to send their children to NGU, and give incentives to companies to hire NGU grads.

Whenever anyone (including NGU grads) states the obvious and tell them that NGU must improve, NGU attacks with emotional statements accusing others of trying endangering their unity, loyalty and pride in NGU and tells all NGU graduates that their must protect themselves against all others. And because the good grads from NGU (and there are some) see the problem as it is, they avoid working in NGU, leaving only the not-good graduates to work there. So as the school gets worse, it will just... errm.. get worse.

1. Why do people in NGU think that they are best suited to run NGU (the process of converting students to graduates) when obviously they need help at both the source (getting the students) and the end-result(getting the graduates hired)?

2. Wouldn't it be more effective if NGU just hire people that are best suited for the job of running NGU?

3. What is unity, loyalty and pride when it gets in the way of unity? When people unite, they should unite for a common purpose.

Why do people behave like this? What were their assumptions? And what is wrong with these assumptions?

What happens when people group together not towards a good purpose, but against everybody that is different, is that unity or bigotry?

Of course, NGU does not exist in real life as a university. But think of this:

1. The automotive players in the US are having problems.

2. They are requesting that the US government give them money to continue.

3. Failing which they will have to close and many many thousands (possibly millions) of jobs will be lost.

4. The japanese car makers have factories in the US employing americans.

5. These japanese car makers are profitable.

And if you are the government, what will you do?

a) give them the money - assume that they can change and become profitable,

b) close them down - assume that the economy wont be adversely affected significantly,

c) sell the companies to someone with money - assume that the buyer can change them and become profitable.

d) get the japanese companies (for a fee, of course) to run the american factories - assume that pride is not a relevant issue

e) hire the american managers from the japanese companies to run the troubled american companies - assume that the new management can rectify the current problems fast enough.

These are merely reactive options. It shouldn't have been allowed to happen in the first place. The financial crisis is not the reason for the collapse, it is a spark that ignited the gunpowder that was collected over the years. More on this another time.

And of course, NGU can represent many things, not just the automotive industry in the US. Take the example and think of other things, including education, politics, economics, etc.