Income vs Production
And other economic fuckery
Contrary to what everyone tells you, I don’t think the economy is doing too hot. Nobody knows where to park their money. Everything is at an all time high. Real estate, startups, stocks, crypto.
I called my friend the other night and we chatted about it, and I think it really can all be tied back to a pretty large critical flaw in the economy:
We now favor income producing assets more than product producing assets
Let me explain:
Let’s say you go to a bank, in two parallel forks of our current universe, to get a million dollar loan.
Fork A: You want the loan to buy a quadplex in Austin Texas
Fork B: You want to start a factory in Austin Texas
The bank will happily approve you for the mortgage, given this is safe, even at a 3.5% interest rate for an FHA loan.
Starting a factory in America is probably a bad move. It’s “risky” in comparison to underwriting a housing loan. There is less likelyhood of this being approved. Overtime, this compounds, because the economics of scale get ruined for starting businesses in America, and we’re forced to rent labor from oversees.
We used to measure wealth in product, but now we measure it in market cap. This, coupled with a stepping off of the gold standard, means the economy is just trending up, almost indefinitely.
And, this results in an economy on a rip for anybody who can “own” something. Ownership has always been key, but it’s important now more than ever because frankly, I think people will realize that the USD is pseudo worthless due to the massive disparity it has between the two American classes.
These companies who can afford to or have invested in production, will continue to be on a rip, and they’ll continue to extract boatloads of value.
How do we democratize the production economy? How do we return to the roots of Gross Domestic Product? I think the only way is better tooling. Otherwise, the economy is going to collapse once the level of angel investor landlords reaches critical mass.
Agree. This is often referred to as the financialization of the economy. The two biggest sectors of the economy as a % of GDP: finance (~20%) and real estate (~12%) by A LOT. We should make more things and make incentivize the ownership of making things.