Ack Recession!

I have lived through 2 recessions that I can remember already and I really don’t need a third. The thing is that our economy used to run in 30 year cycles according to our history books. Now we seemed to be on a 10 year cycle early 90’s recession and 2001 recession pointed to this. And this time we were only growing the economy for about 5 years! (2002-2007) So, the Fed didn’t improve the economy by lowering interest rates back in 2001-2003 they just sped up the cycle.  And what they are doing now may be speeding up the cycle even faster. What will life be like if we have alternating boom bust years every other year? This is getting a little crazy.

How do you plan for your retirement or family or future with a yo-yo economy?

How can you buy property not knowing if you will have a job in a year? Or be able to get a job in the US reliably in 10 years when they have all gone overseas to lower rent districts? Sure some people will, but what about the average masses? Even those with college degrees keep having to change direction into the flavor of the month job wise with these companies and not everything is a living wage.

I just don’t know where our economy is going considering we have opened the door ourselves on developing nations and are being hit hard by how it has stolen the majority of our growth and industry. We are left as a nation of 300 million luxury consumers that on average owe $128,000.00 each to the bank (per economist’s state of 2008) and will take everything out on credit to have the latest new stuff. When we can’t borrow anymore or pay the bills (like now) the economy will crash and people don’t have any savings to stay afloat. I call that false growth in the first place, but the markets don’t seem to distinguish between what they can falsley get you to buy into for a while before it crashes and real growth, nor do they seem to care.

Doesn’t it feel like 1929 to you sometimes?

Of course these are generalizations and you may not fit the bill at all here but it’s the generalizations that run the economy right now. And I think it’s sad. Our nation’s executives and business leaders have sold out to the lowest bidder and given our jobs away with no loyalty to the country which made all their wealth possible. All the while expecting us to mortgage ourselves to the hilt to keep buying their goods. Something has to change with corporate accountability in order for this to settle without a complete melt down disaster.  And stop blaming the American consumer. It’s not their fault. If they weren’t set up to fail by huge greedy businesses none of this would have happened.

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Advertising and Economic Growth Dissertation

advertising-and-economic-growth.pdf

Ok, back to the serious stuff again… (ugh) I have been reading this study on advertising on economics, while I am on the train. (it keeps the crazy people away) Advertising and Economic Growth by Maximilien Nayaradou and prepared by the World federation of Advertisers. (I guess there is a federation for everything) It is very interesting, and as always I am looking for clues and insight into my own market and analysis category by way of these theories and research. I am only 1/2 way through it but 2 things have struck me thus far.

advertising economics correlation

1. The consumption trend for the US is crazy high compared with the rest of the world. The people here are really living on thin ice financially. There is very little saftey net if you spend 70% of your income (considered consumption in the chart). The formula is More Advertising $ Spent = More Consumer Consumption. But notice the law of diminishing returns, and how high the spending had to get just to move the needle that little bit between the UK and the US which are already at the highest end.

2. The correlation they talk about between higher advertising rates and higher economic growth rates are not really true in my opinion. I do not think extra advertising raises growth rates, I think it speeds up and condenses a product life cycle in a shorter time. The result is that things get old faster, out of fashion faster and people want new stuff faster. Therefore excessive and mass advertising would condense a product’s lifecycle from 5 years to maybe 2 at best. You train people to want something new every 2 months and your product won’t sell at all in 3. It all leads to a faster churn of companies growing booming and later failing and going under. That’s not new growth, that’s growth that would have happened anyway, you just made it faster, and it will drop off just as fast when people get tired of it and stop buying. No one talks about the downward slide on the other end, or how this creates a turblulent economy where people get laid off from jobs every 2 years and companies have to get bailed out all the time.

Don’t get me wrong, I like advertising in general. I have always been fascinated by it and love it’s news like ability to reach consumers and inform them about new priducts, information and entertainment when it is relevant and benificial. But I HATE over-advertising spammy companies that think that with enough money spent plastering their name on everything that moves, they will be able to keep that upwards growth trend going. You have to realize that people are over sensitized and will block it out after a certain point, and if they have a bad experience with the product they are not going to be very willing to give it another chance. Unless they aren’t that smart, but then as a country we have even bigger problems.