“One of the continuing debates throughout modern economic history (modern meaning the past 300 years or so) has been that of the relationship between production and consumption, the source of what we call Say’s Law. [Ibn Khaldun (1332-1406): “When tax assessments and imposts upon the subjects are low, the latter have the energy and desire to do things. Cultural enterprises grow and increase, because the low taxes bring satisfaction. When cultural enterprises grow, the number of individual imposts and asssessments mounts. In consequence, the tax revenue, which is the sum total of (the individual assessments), increases].
This is what separated Say and his allies from Thomas Malthus and the Classical economists from Marx and his followers. The debate went on into the 20th Century, with the Austrians taking one side, and the Keynesians the other.
The basics of the debate are this: One side (Say and those who followed him) says that consumption and production are directly related, and that consumption flows from production, or “supply creates its own demand.” The source of one’s consumption, they argue, is one’s production. On larger scales, economies that produce much also are going to be societies that engage in the most consumption of goods…..”
More on why the party really is over, from a look at the historical evidence, presented at the Mises site by Bill Anderson.
And at the art houses, according to Rick Ackerman,
the festivities are also slowing down:
“Ms. Sharp may be right about the emetic effect a shakeout would have on all of the second-rate stuff being snapped up these days by collectors with bigger money and pretensions than taste. However, we think she may be grossly underestimating how very bloated prices are for Picassos and Warhols. Indeed, at $50 million to $70 million a pop, the best works have quite a bit of room to fall, especially if the global financial bubble pops. Will the owners of such works feel as passionate about them if they decline in value by 50 percent or more? We may get a hint in the coming weeks, since an unusual number of works are headed to auction. Our guess is that if prices merely fail to rise, let alone drop, the smell of fear will become as pungent in the art world as it already is in the bond houses…..”
And, finally, we know it’s closing time from the writing on the wall…er…house...at Bloomberg.
“Sales of previously owned U.S. homes fell in August to a five-year low, extending a slump that threatens to stall economic growth.
Purchases declined 4.3 percent, less than forecast, to an annual rate of 5.5 million, the National Association of Realtors said in Washington. Sales dropped 13 percent compared with a year earlier and median home prices rose 0.2 percent to $224,500.”
Predictably, the dollar slumped toward 78 on the index.