Previously on Sharpfokus
The 3 meanings of ‘economy’, Sharpfokus95
June 17th, 2019
⏰ 2 minute read
⏰ 2 minute read
No growth now
If you love data one cool thing is to search Google trends for word use. Look up ‘economy’ & it’s been in decline since 2008. That makes sense as 2019 marks 25 years since Japan’s economy last grew, 12 years since any EU economy grew & 7 years since the Indonesian domestic economy (imports) did (all in $s).
Household
Greek
I’m beginning to wonder if the problem is that people have forgotten what an economy is. If you look up the dictionary definition, you’ll find 3 basic meanings. First is the original meaning from the Greek ‘oikonomia’ meaning household management. Management of a household, your household. All our households.
Was
If you think about thriving & growing economies like say the US after independence, this is the image (maybe via movies) which probably springs to your mind. Households working hard to grow & thrive in challenging, threatening, risky but ultimately very, very rewarding conditions.
Company
Later individual households grew into larger organizations of people called companies. Today we have huge companies but many have forgotten their more simple roots & become bogged down by bureaucracy. The more successful recent ones Apple & Amazon have kept their organizations simpler & grown fast to huge sizes.
Freedom
But the most successful economies are still made up of millions of small businesses which have the freedom to do whatever they want, to start up & manage their own household destinies. Big companies too can only thrive when they have equal opportunities & freedom from (government) interference.
Careful
Class
The second definition is the one most unlikely to lead to having a successful economy. That’s the meaning of thrift or saving. You might best associate this with something like economy class on a train or plane. But who wants to travel economy? Everyone wants first or at least business class.
Cost
This type of economy can also be associated with cost. Being the lowest cost, like the lowest cost producer. But who wants that? You don’t want the lowest cost product you want the most expensive & best. As a company you’d rather have the highest priced, best selling product with the best margins.
Save
This definition can also mean saving. Like saving money by putting it in the bank. That used to be a popular thing to do in Indonesia where interest rates have been high: But saving never made anyone super rich & the more people save, the lower the returns get. In Germany, Japan rates are now negative.
Consumption
Produce
The main definition of economy is the creation of wealth in a country by producing & most importantly consuming with each other. On this basis only the US & UK are real economies with 70% consumption. Germany, Japan are 50%, China just 39% & thus totally reliant on other countries economies.
Sell
This means that to be a successful economy you need to be able to sell things. The places which are the most sales oriented are going to be the most successful. No surprise that in Europe sales is considered a terrible thing & there are increasing regulations to make it more & more difficult, often disguised as ‘consumer protection’.
VAT
One of if not the biggest anti sales tools is tax & specifically consumption related taxes like VAT & luxury tax. VAT is 20% in Europe, 16% in China, 10% but ubiquitous in Indonesia & 0% in the US. Here we also have luxury taxes on cars & import duties on mobile phones & computers
No growth future
With growth so slow everywhere, here’s the definition of a what it would take to make a successful economy. The freedom to go & look after your household as you choose, not saving too much which inevitably means much more consuming, & allowing & encouraging as much selling to your own people as possible. Anything else will result in 0% growth.
Be a great investor!
Sebastian
If you love data one cool thing is to search Google trends for word use. Look up ‘economy’ & it’s been in decline since 2008. That makes sense as 2019 marks 25 years since Japan’s economy last grew, 12 years since any EU economy grew & 7 years since the Indonesian domestic economy (imports) did (all in $s).
Household
Greek
I’m beginning to wonder if the problem is that people have forgotten what an economy is. If you look up the dictionary definition, you’ll find 3 basic meanings. First is the original meaning from the Greek ‘oikonomia’ meaning household management. Management of a household, your household. All our households.
Was
If you think about thriving & growing economies like say the US after independence, this is the image (maybe via movies) which probably springs to your mind. Households working hard to grow & thrive in challenging, threatening, risky but ultimately very, very rewarding conditions.
Company
Later individual households grew into larger organizations of people called companies. Today we have huge companies but many have forgotten their more simple roots & become bogged down by bureaucracy. The more successful recent ones Apple & Amazon have kept their organizations simpler & grown fast to huge sizes.
Freedom
But the most successful economies are still made up of millions of small businesses which have the freedom to do whatever they want, to start up & manage their own household destinies. Big companies too can only thrive when they have equal opportunities & freedom from (government) interference.
Careful
Class
The second definition is the one most unlikely to lead to having a successful economy. That’s the meaning of thrift or saving. You might best associate this with something like economy class on a train or plane. But who wants to travel economy? Everyone wants first or at least business class.
Cost
This type of economy can also be associated with cost. Being the lowest cost, like the lowest cost producer. But who wants that? You don’t want the lowest cost product you want the most expensive & best. As a company you’d rather have the highest priced, best selling product with the best margins.
Save
This definition can also mean saving. Like saving money by putting it in the bank. That used to be a popular thing to do in Indonesia where interest rates have been high: But saving never made anyone super rich & the more people save, the lower the returns get. In Germany, Japan rates are now negative.
Consumption
Produce
The main definition of economy is the creation of wealth in a country by producing & most importantly consuming with each other. On this basis only the US & UK are real economies with 70% consumption. Germany, Japan are 50%, China just 39% & thus totally reliant on other countries economies.
Sell
This means that to be a successful economy you need to be able to sell things. The places which are the most sales oriented are going to be the most successful. No surprise that in Europe sales is considered a terrible thing & there are increasing regulations to make it more & more difficult, often disguised as ‘consumer protection’.
VAT
One of if not the biggest anti sales tools is tax & specifically consumption related taxes like VAT & luxury tax. VAT is 20% in Europe, 16% in China, 10% but ubiquitous in Indonesia & 0% in the US. Here we also have luxury taxes on cars & import duties on mobile phones & computers
No growth future
With growth so slow everywhere, here’s the definition of a what it would take to make a successful economy. The freedom to go & look after your household as you choose, not saving too much which inevitably means much more consuming, & allowing & encouraging as much selling to your own people as possible. Anything else will result in 0% growth.
Be a great investor!
Sebastian
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