One important lesson on economics from someone who’s picked up on a few things…

Put basically: If they’re offering it to plebes like you, the bubble is about to burst.

There are numerous economic bubbles in past and present. The stock bubble. The internet bubble. The housing bubble. The quantum chocolate bubble. Okay, I just wish there was a quantum chocolate bubble…

The point is, bubbles are just like pyramid schemes. Sooner or later, they’re going to run out of people to sell it to and the whole shebang is going to fall on top of whoever’s stuck on the bottom.

That usually means the “sucker” portion of the common throng. The people who believe they’re going to get rich by investing everything they own on a shanty-house in BF-nowhere that the bank says is worth tons and that said people can’t possibly repay inside of ten lifetimes.

The people who genuinely believe that sending a letter to five friends will result in a vast fortune arriving to them by mail.

The people who really think that some wealthy person in Nigeria [or wherever] is going to launder their millions through a plebe’s bank account.

And the people who think pyramid schemes really, really work.

Let me run through some math. Person A decides to start a little scheme selling otherwise worthless pieces of paper as part of a pyramid scheme. He sells to ten people and gives instructions to each to sell to ten more. They remove their names once they’re at the top of a list of ten people.

On the first iteration [the first sale] there are 11 people in the loop.

Second iteration, 111 have bought in

Third, 1111.

Fourth, 11111. Fifth 111111. By the sixth iteration, you’ve reached over a million people. By the ninth, one billion.

There are about sixty billion people on this earth, the last time I checked. At that rate, you’re going to run out of suckers. And the last people to buy in are always the first to cop the consequences of falling for it.

Same principle with [Mad-Lib here] bubbles. The richest people get hold of said maguffin first, and sell it at inflated prices to those lower in the economic scale as an investment opportunity. Increased demand equals increased value, and a few of the lower echelon sell it down, again at an increased price, to those slightly beneath them.

Lather, rinse and repeat for a few iterations and Joe Schlubb and his neighbours are all desperately trying to sign you on to Maguffin Inc.

Only the skeptics can survive bubbles with their fundings intact. Them, or the people who started it in the first place.

If you’re at a sales pitch and they mention the wealthy’s secrets to getting rich, leave. That’s a sure sign you’re about to be bubbled.

Everybody Needs to Read One Book

And it ain’t the Bible.

Yeah, I’m probably going to get pwn’d for saying that, but in these days, in this situation, and with the Occupy movement going everywhere like ice cream on a toddler, this book is essential.

The book is called How an Economy Grows and Why it Crashes by Peter D. Schiff

It explains the economy problems currently causing people to be out on the streets banging on drums and shouting at the corporate fat cats, etc.

It tells us exactly why our money is a complete fiction and how making more of it is only going to dig us deeper. Sure, it blames the governments a little too much, and doesn’t look too hard at the really big lie - i.e. corporations are legally people - but it does explain economics in terms even an idiot like me can understand.

Everyone should have a copy. Read it in the streets to anyone who’s interested. Give a copy to a friend.

Hell, send a copy to the White House.

I won’t advise thwacking an ignorant corporate executive with it, ‘cause those guys won’t take a clue until the Revolution comes ;)

Especially make anyone who’s hardcore Government Deregulation Now read the damn thing and understand how deregulating corporations put us all in the shithole in the first place.

Understanding the problem is halfway towards creating a solution.

Dollar Shop Economic Theory

I’ve had this one baking on the back burner for quite some time. And since I have nothing else in my head but brewing brony tales, I figured I’d best get this out of my head to make some room.

The Dollar Shop is a phenomenon out my way, where you can walk into a shop and get an item [or a number of items] for a dollar a piece. Some cost more than a dollar. Many cost up to five. You can get a rare few for more than that, but not normally. Dollar shops sell cheap gimcrackery, gadgets and gewgaws. Some, but definitely not all, are useful. Some only catch dust. Almost every last item in a dollar shop is made to last less than a week. A month if you treat it carefully.

They also sell gadgets and gizmos amazingly like the ones you see on TV for five easy instalments of $99.95… for a hell of a load less than damn near $500.

It is so very, very easy to walk into a dollar shop and blow $100. Even if you go in with the intent to purchase just one item, you are guaranteed to find five more that are both tempting and affordable.

And since the cleverer ones stock food and house maintenance necessities, they make money hand over fist.

That’s not the theory. That’s the exposition.

You know these shops. You probably have one or two in your area. Unless you’re in a super-rich gated community, in which anything that’s not worth at least twenty is not worth handing over Daddy’s credit card for.

The theory is this: You can instantly read the state of a community’s economy by counting the dollar shops in a particular area.

At the depths of our own economic pit, four or five years ago, there were seven in my immediate shopping zone. There’s still four surviving, but they’re comfortably apart. It’s when they *cluster* that you know things have gone far up that famous creek. In a barbed-wire boat. Minus the paddle.

When you have competing dollar shops clustering in a shopping zone, you know the folks who live there are populous poor. Or at the very least, populous impoverished. They barely have enough to make ends meet, so they go to the dollar shops to skimp a few cents here and there. The populous comes from the fact that three or more dollar shops can exist in the same zone without driving one another out of business.

When too many people can’t make ends meet, the dollar shops thrive. People can no longer afford to go to the advertised and branded big box mart, and only go there when they can’t find what they need in the dollar shops.

Worse news for box marts, Dollar shops train shoppers to only look for what they need. Seriously, if you want to save your money in a dollar shop, go in with one objective and a definite allowance: “I will only buy X and if I am tempted, I will only spend Y”. That way, shoppers walk out of there without a shitton of useless crap. Or quasi-useful crap.

Dollar shops train shoppers to avoid the trolley-snagging “hot spots” of crap you just can’t sell, Boxmart. It’s in your personal best interest to make sure your shoppers can afford your overpriced crap and not go to somewhere cheaper.

“How?” I hear you cry. “The economy’s about to crash! We have to hang on to our money!”

Well… you have to spend money to make money. No, not on executive bonuses. No, not on clever marketing campaigns. On jobs. Spend money on wages for people who live in the area. Generous wages. Give them a small employee discount. It will generate loyalty and most of their wages will come straight back to you.

Yes, you lose a little on the deal, but it’s got to be better than the money going straight to Mexico (or wherever) by hiring illegal immigrants for less.

The thing is, people who have more money spend it on more expensive things. People with less, take what little they have and use it for their own “selfish” advantage. Which means that Boxmart winds up with nothing.

And that’s the Dollar Shop Theory. See if you can use it in your area.