Emotions, Exports, and the Economy

Like it or not, people are driven by their emotions.  Some people acknowledge and accept that fact, others however live in denial.   It is those people that you should be worried about as they tend to hide their emotions behind “logic.”

The biggest emotion that drives people is fear of loss.  Fear drives the stock market for example.  People sell when they are afraid of losing money, and inevitably this fear causes the very thing they feared.  “Smart” people capitalize on this fear.  It is why so many investors get rich when the market takes a downturn.  They buy stocks when they are “on sale” because people are selling out of fear.  Smart people also capitalize on people’s stupidity.  People tend to buy stocks when they rising in price, often when they are close to peaking.

Unfortunately the market itself is a giant pyramid scheme.  The basic definition of a pyramid scheme is when people buy something that has little to no value simply in the hopes of selling it to someone later for more than they paid for it.

Wikipedia says: ”A pyramid scheme is a non-sustainable business model that involves promising participants payment, services or ideals, primarily for enrolling other people into the scheme or training them to take part, rather than supplying any real investment or sale of products or services to the public. Pyramid schemes are a form of fraud”

While some people buy stocks for the dividend benefits, or for the benefit of having a vote in the shareholder’s meeting, most buy them simply to sell them someday for a profit.  This system, and frankly our entire economy needs infinite growth to sustain itself.

Many people say the solution to this is that we need more jobs and to reduce taxes and reduce spending. They are right, but only half right.

First off, we do need jobs, but we need the right kind of jobs.  It really won’t help the country to have a ton more telemarketers, brokers, and bankers.   Why?  Because they don’t produce anything. Just look at our import versus our exports.  A 2008 estimate from wolfram alpha states that the United States imports 2.539 trillion dollars while only exporting 1.838 trillion dollars.  If we picture every country in the world as an individual in a small economy, the U.S. is spending way more than it makes. If the U.S. were a member of tribe it would probably be expelled, because it is consuming much more than it is producing.

The reason of this is another pyramid: Maslow’s Hierarchy of Needs.  If you have had psychology 101 you might remember this model.   Maslow was a psychologist that proposed that we as individuals have stages of needs, conceptualized by a pyramid in which the lower level needs must be fulfilled (for the most part) before higher needs can be filled.  The pyramid looks like this:

Maslow's Hierarchy of Needs - Click Image for Full Sized View

Take a look at that list and then look around at the economy.  Which of these general categories are the most popular for people to both buy from and work in?  Most of them like fancy cell phones, cars, art, video games, etc, are in the upper part of the pyramid.  Obviously we will die faster without air than without art, yet most industries in America are geared toward these luxury items.   Now I am not saying these things are not important, I myself am a programmer by trade.  What I am saying is that when everyone decides to abandon the family farm and start work as an artist or a programmer, it puts more of a strain on our abilities to meet basic needs.  The pyramid begins to look more and more inverted, until it at last, it topples. People seem to be wanting the upper stages more than the lower ones, even though the lower stages are necessary to survival.

What can you do about it?  If you are employed in one of the upper tiers of this model, then find some way to invest in the lower level ones.  Start producing at least a portion of your own food, water, energy etc.  Perhaps try to invest in some companies that responsibly produce these things.  These are just some ideas but the main point is that America, and frankly the rest of the world will need to produce more, consume less, and seek more efficient means in the future.

About the author: Jake Reed is programmer and creator of Survivalize.com which is a site dedicated to helping people become more prepared for whatever life throws at them.

1 comment to Emotions, Exports, and the Economy

  • Gaspar A. Cruz III

    The idea that you will have to go to a coin dealer or a middle man of sorts is not true. Throughout history traders have used gold or other precious metals for transactions without the benefit of a value arbitrator or middle man to decide the value of the gold currency.the value will be decided by the vendor and buyer as to what is equitable for this particular transaction

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