It does not take a Dr. of Economics to
understand or fully appreciate the impact that scarcity has on the
American economy and the American way of life. By now, I am sure
that most Americans remember the financial meltdown of 2008 and the
how scarce money was, and if you were not on the same wave length as
the rest of us, then I am sure you appreciated the concept of
scarcity when gasoline prices rose to almost $5/gallon. But, just in
case your memory banks are full on nonsense, let me return to square
ONE and bring you back up to speed.
What is Economics?
Economics is the study of
the allocation of scarce resources that
have multiple purposes. So economists look at how
items are distributed to the public on a large scale and this is done
from 2 vantage points.
The first vantage point
is from the perspective that these items are scare and scarce simply
means that one CANNOT get all the items to the store when the people
who are going to buy these items want to have them there.
For instance, say you are making bead
necklaces and you can make 100 necklaces a day and as soon as that
day is over, you take them to the market to sell them or you have
someone else take them to the market to sell them while you make
more. Those necklaces sell out in an hour but it is going to take
you another day or work before you can send another 100 necklaces to
the market... and this creates a shortage of your necklaces which
therefore makes them scarce.
The second vantage point
is being referred to as having multiple purposes and the best way to
explain this is from the standpoint that you own a dairy farm and
supply milk to the market on a daily basis as well... but, your
milk is purchased not just by people who want to drink milk, but also
by people who use milk as an ingredient to make other items like
bread, cakes, pies, pancakes, waffles, and cheeses, just to name a
few. Consequently, the milk that you take to the market has
multiple uses.
So, if all those people who need/want
milk for a variety of reasons need/want it at the same time, then the
supplier of milk MUST figure out a way to allocate milk to each one
of those buyers and this could be done equally to each one, or it
could be done by price and how much are these buyers willing to pay
me for my milk. And, in so doing, scarcity is again created in the
market.
In either case: milk or necklace,
PRICE can be used and often is used to make sure that these items are
still around until a new supply can be brought to the market for
sell. Therefore, PRICE regulates the allocation of these scare
resources that have multiple purposes.
If we then look at Petroleum Crude Oil
and understand that this oil is not just used to manufacture gasoline
for our automobiles but it also used to manufacture jet fuel and is a
key ingredient in the manufacturing of plastics... but, if oil is
scare and the jet fuel manufacturing companies are willing to pay
more for that oil that the gasoline manufacturing companies are, then
that oil is going to be sold to the jet fuel manufacturers and not to
the gasoline manufacturers... and, the result is a higher price per
gallon at the pump.
But, there is more to the story of
scarcity than what has just been described... so, let me explain
that as well...
I am sure that many or perhaps most of
us are aware of the drought in the State of California and all the
wild fires that they are experiencing because of the dry conditions.
Well, in addition to all the homes that have been lost by these fires
that may not impact our families outside the State of California,
what will impact our families is the fact that much of our fruit and
vegetable supplied to grocery stores across the US come from the
State of California... and, if I am not mistaken, growing stuff
requires water and when there is little to no water, then stuff will
not grow or not as well.
And, this economic scarcity will cause
higher prices for fruits and vegetables... and, it is not just
fruits and vegetables but bird flu has caused the death of lots of
chickens to the point that economists are predicting not just a
shortage of eggs but extremely higher prices as well. In fact,
there are places in the States of Texas and California that are
rationing eggs to consumers.
It also stands to reason that if there
are less eggs, then there are less chickens and if there are less
chickens then the price for chickens is going to increase as well.
Another example...
Warm weather typically causes crops to
grow faster which is good; however, some crops like wheat and grains
should not grow faster which will result in reduced yields. Just
one aspect of wheat and grain is what cattle farmers use to fatten up
their cows...
So, less grains and wheat, less fatten
cows and less fattened cows, then less beef for sale and higher
prices at the grocery stores and subsequently at the check out lines.
Here is what I think most Americans did
during these last few months of LOWER gasoline prices at the
pumps... they either drove more or took that extra money and spent
it on other stuff that they may or may not have needed.
I would be completely and
overwhelmingly surprised if I heard that a majority of Americans
saved the extra money not spent on gas to spend later on other items
that may have increased due to unexpected situations.... LOL on this
one...
And my friends and also my foes,
despite these higher prices, employers are not going to giving out
higher raises or paying higher wages... that just will not happen
as our economy is in a posture very suitable for extremely slow to
moderate economic growth.
America sells most of its output to
countries in Europe (or Eurozone) and when they are experiencing
economic issues like they are RIGHT NOW, then these Europeans buy
LESS STUFF from America and if less stuff from America is purchased
then employers have less money to share with their employees...
while still making the profit they want and need to make so that
their lifestyle is not upset.
Our Bankers, Real Estate People, and
Speculators were totally responsible for the financial meltdown in
2008 that HURT so many MIDDLE CLASS Americans and while NONE of these
Executives went to JAIL, Wall Street and the Stock Markets have
rebounded and then some... but, our working economy is sluggish
and Owners and CEOs are apprehensive regarding an uncertain future
and investing; especially, with unrest in the Middle East, Economic
uncertainty in Europe, and an Economic stumble in China...
Global Warming just makes all of this
worse than it really needs to be... but, there is no one to blame
there but OURSELVES.... and, God knows we cannot do that.
Now, to add icing on our Economic
Scarcity/Shortages Cake, we have the rest of the world (outside of
the US) growing as they become more and more involved in
globalization and global economics. For example, the Middle East has
money to burn from selling its oil to the rest of the world... and,
these Middle Easterners are buying more and more of the same stuff
that Americans are buying.
Then we have an enormously large
growing Middle Class in China and because of their excess wealth,
they too have money to burn and are buying more and more of the same
stuff that Americans are buying.
Then there is India, which is right
behind China in population which includes a growing Middle Class as
well and this Middle Class also has money to burn and are buying more
and more of the same stuff that Americans are buying.
Now, when you put all of this stuff
together... and, I have, then what results is a situation whereby
Americans are going to be presented with less stuff but at higher
prices... of course, we could declare war on these other people and
kill them all off so that they will have no money to burn and will no
longer be in a position to buy the same stuff that Americans buy.
However, I don't think that would be a
good idea at all, and believe that we would be better off if we took
our chances with Global Warming instead.
And, it is predicted by several experts
from several areas that these patterns will continue for several
years to come... or, well into your future.
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