Dear Friends,
It seems to me that most economists are looking at the extrinsic facts and drawing conclusions that are in fact at odds with the intrinsic qualities of those very facts. Extrinsic facts are like “a blade of grass is green…” Intrinsic quality of that fact would be “… because it has chlorophyll in it.” Extrinsic qualities are what is immediately visible, felt, heard etc… Intrinsic qualities are what the extrinsic qualities are from.
The example that immediately comes to mind is the personal spending of the American citizen. Economists are surprised at the resilience of the American spender. While the savings rate has gone up slightly the rate of spending, a major factor in economic output, has remained remarkably stable despite the high energy prices. -These are extrinsic facts.
Economists then draw their multitude of reactions to these extrinsic facts. They wax poetic on Bloomberg radio every day. Their conclusions have one flaw however… Few tunnel below this extrinsic layer to plumb the intrinsic qualities of those facts. Then plug the intrinsic qualities of those facts into their theories to see how they hold up.
Something that effects the way we, the masses, think is cultural knowledge. This cultural knowledge is sometimes urban legends, common knowledge, streetwise or any number of names connoting cultural knowledge. American cultural knowledge is based in a capitalistic ethos. An ethos that weighs benefits against liabilities.
The Elite have been trying for generations to erase our capitalistic ethos and replace it with egoism. Egoists are as stupid as they are self centered. As such they are easily manipulated and led. They vote regularly against their own self interest out of ignorance and hubris. But I digress…
Part of the American cultural knowledge is that the level of spending in the US capital is actually unsustainable. We know this in our guts. No one is ignorant despite those that claim otherwise. This gut feeling leads us to the inevitable fear of hyper inflation. This fear of hyper inflation is a powerful motivator.
If we know our money may be worthless in a few years then why put money away? It is not in our self interest to work hard for money and stash it away, knowing that if we do, the government’s policies will erase it completely. To do so would be stupid. It makes more sense, if hyper inflation is actually around the corner, to “stock up.”
When things become too expensive to buy, or food becomes so expensive, it squeezes out any discretionary spending, if we bought new durable goods, they will last long enough that we might weather the hyper inflation. Once the economy resets we can resume our lives.
The huge inflation we are seeing in food and energy only feed into this thought process. Especially when the government denies the obvious. If inflation were measured today the way it was prior to 1980 it would be pushing 9-10%. This is not hyper inflation but it is certainly not the placid 2-4% the government would have us believe.
Another extrinsic fact is the small business outlook. Basically a survey of the attitudes of small business owners about their near term prospects. It has been low since the crash of ‘08. It has gone up and down but has remained suppressed as compared to it’s historical average.
Cultural knowledge comes into play here too. Small business owners are integral parts of the community. They contribute to, pass along and keep safe, cultural knowledge. Lately the US government has been vilifying business. This vilification has been against the profit motive, that businessmen won’t put “community” interests ahead of their business interests, even the vilification of Wall Street has spillover effects in the arena of cultural knowledge.
No one likes to be vilified. It makes people feel insecure. Couple this with the rash of regulation that creates much more work for the small business owner and the intendant profit reductions that always hitch a ride with any new regulation… and voila, you have diminished attitudes.
There are many ways cultural knowledge influence the extrinsic facts of economics. All economics being, in large part, the large scale emergence of the effects of cultural knowledge on the behaviors of the masses. To consider the outwardly only is to ignore the underlying reasons.
