> who is going to consume these products if people are saving?
Peter Schiff tells the story of a six guys stranded on a deserted island: five Asians and an American. They divide up the work as follows: one Asian hunts, one Asian fishes, one Asian gathers vegetables, one Asian cooks, and one Asian tends the fire. The American has the job of eating.
Peter says that an economist would look at the situation and explain that the American is the key to the whole enterprise. Without the American, the Asians would not have jobs.
The truth is that supply is its own demand. Whatever you produce that is surplus, you can trade for another's surplus. The problem in economics is not how to increase demand, but how to increase supply: how can people produce more useful things so that they can trade their surplus for the surplus of others.
If you are going to be a self-sufficient farmer, you need land. Otherwise, you need something you can trade for food. If you can't produce something that anyone wants, you are labor isn't worth much. If you labor isn't worth enough to eat, you starve.
China inflates its currency to buy dollars. Then, US consumers use those dollars to buy products from China, which requires employing lots of people.
The government could just hand out money to poor people, but that could just result in lots more corruption. They can also create useless jobs but that also has problems.
I am not saying producing is not important, my point is that you cannot just demote consumption to an unnecessary side variable, because even when you trade your surpluses, you each are the market for the other.
Does that not make consumption as important? What if no one likes fish other than the one Asian? What happens in that scenario?
If no one likes fish, then fish are not "supply." They are waste from an economic standpoint. Toyota famously took this view, that over-supply is waste. Their just-in-time production was designed to eliminate this waste.
This is clearly the "build it and they will come" bullshit. I had hoped the Hacker News crowd would be the first to recognize that demand doesn't just "appear."
Supply and demand are just two sides of the same coin. To Apple, the iPhone is supply. Apple supplies iPhones to meet consumer demand. But the iPhone is also Apple's demand. Its production of IPhones determines how much other things it will be able to buy.
To consumers, the IPhone is something they want (demand). But their demand is determined by what they supply. A programmer ability to pay for (demand) an iPhone depends on his ability to supply programs that someone else wants.
"Build it and they will come" is truth as long as you're building something someone wants. A farmer who decides to plant corn or soybeans will have a demand for his crop, because people want corn and soybeans. The price/demand fluctuates based on how badly they want it.
Programming is no different. If you build something people want, they will come. The problem is that programming has so many degrees of freedom and it's so scalable that it's a lot easier than farming to supply something that no one wants.
Peter Schiff tells the story of a six guys stranded on a deserted island: five Asians and an American. They divide up the work as follows: one Asian hunts, one Asian fishes, one Asian gathers vegetables, one Asian cooks, and one Asian tends the fire. The American has the job of eating.
Peter says that an economist would look at the situation and explain that the American is the key to the whole enterprise. Without the American, the Asians would not have jobs.
The truth is that supply is its own demand. Whatever you produce that is surplus, you can trade for another's surplus. The problem in economics is not how to increase demand, but how to increase supply: how can people produce more useful things so that they can trade their surplus for the surplus of others.