The Deception of Consumption

I walked out of an investing seminar recently because the speaker used this fallacy–that consumer spending is the basis of the economy–as a foundational argument for his thesis. [snip]

When the Great Depression hit, the intellectuals and power elite of the period intervened in the failing economy by forcing entrepreneurs to maintain the high wage rates of the Roaring 20’s.

High wages do not lead to prosperity; prosperity leads to high wages. Wages are simply a byproduct of production; when production increases, so do wages because they represent an increase in value to the economy. Conversely, as productivity decreases, so must wage rates.

I challenge anyone who believes that consumption drives the economy to accrue as much debt and consume as much as possible, regardless of your level of production, and see how long your home economy lasts. Consumption removed from production leads to nothing but bankruptcy and insolvency.

Our ability to consume is based on our ability to produce. If we wish to consume more, there is only one way to do it without bankrupting ourselves or stealing from another, and that is to produce more. Entrepreneurial production is what drives economies–the only solution to failing economies is to eliminate all external forces that inhibit our ability to produce...

[I.e., we must keep industry healthy {low taxes/regulation}, especially small business - the majority employer in the nation. Recommended > ]

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