Posted on 06/17/2017 5:00:39 AM PDT by Kaslin
Central bankers, Presidents and Prime Ministers, Oil Sheiks and even main stream media types forget or refuse to accept, when it comes to decision making, that most basic of economic principles, the Law of Supply and Demand. There is nothing that isn’t influenced by this simple principle. The most uneducated person has no difficulty grasping this core concept. Why then do the majority of the world’s decision makers fail to accept the reality of this most powerful principle? From college graduates and oil to immigration and debt, every consequence can be explained away by the simplicity of this age old truism.
The estimation is that this graduation season more than 2.5 million students will have received their Bachelor's and Master's degrees and will enter the workforce. Contrary to their commencement speakers charge that “they can do whatever it is they want” there is little hope that the majority will find the world of work a very welcoming place. The majority of degrees, while providing an opportunity to extend the carefree days of High School, will provide very little in the way of DEMAND for their services. It is not that occupations in Art Appreciation, Anthropology and Sociology don’t exist it is just that a help wanted sign has not appeared in several years for these and other professions. Yet every spring the SUPPLY continues to grow with no end in sight, all with the encouragement of the Federal Government, College Administrators and hopeful parents.
Regardless of whether OPEC cuts its oil production, a lot or a little, there are always other producers to step in and fill the void. Historically rogue OPEC members themselves have broken the agreements. Most recently the American shale oil industry has, with the benefit of artificially low interest rates, been the biggest opponent of the OPEC strategy. Limit SUPPLY and of course prices will surely rise. In order to be successful DEMAND must be a co-operative component. When the realization that China has stopped its insatiable consumption pattern and other growth factors are in question all “bets will be off.” Then it will be every man for himself and the world will be awash (overSUPPLYed) in the black gold.
Open borders arouse heated emotion from both the left and right. Regardless of which side of the debate you find yourself supporting a greater issue is at work here. The Law of Supply and Demand is neither left nor right, it is not emotional and it could care less about your political affiliation or your religious tolerance level. More people entering the country legally or illegally means a much longer wait in the doctor’s office. It means more students expanding an already overcrowded primary classroom. It also means the continued decline of household income as over SUPPLYed workers continue to accept lower and lower wages.
Even United States debt is not immune from this basic of all economic principles. Via QE billions of dollars and other foreign currencies have been utilized to acquire an ever shrinking SUPPLY of long term Treasuries. Regardless of a misguided Fed and ever increasing short term rates, the DEMAND for long term Treasury paper has only accelerated calling in to question the Fed’s already questionable strategy.
These four are only examples of the power of this most ageless of Economic principles, yet the colleges will continue to spew out worthless degrees, the oil industry will continue to add drilling rigs at record rates, liberals will march to accept any and all who want to come to America and the Fed will continue to raise rates when negative rates is really their “druther.”
Regardless of the subject matter most of the world’s decision makers do in fact understand this basic economic law, it’s just that they believe the basics of economics don’t apply to them and of course they are above any law. History is filled with the episodes of eventual calamity by those who have lived with this attitude. It will not be any different this time.
The power of the law of SUPPLY and DEMAND must never be disregarded or even underestimated, the consequences are always too disastrous.
And there is nothing like your government forcing you to buy healthcare
Excellent post!
Our fearless leaders believe they can repeal the law of supply and demand. They make laws all the time!
It is because they believe themselves to be wise enough to overcome physical law. The fact is, physics *cannot* be overcome. And the law of supply and demand stems directly from physical principles.
Technically, they force you to buy health insurance, not healthcare. Those are two separate industries.
Except of course with guaranteed issue health insurance isn’t really insurance anymore.
Inflation is caused by to many dollars chasing to few goods.
The main reason why this is so is something that the writer overlooks—our immigrants, legal and illegal, are overwhelmingly limited in skill and ability.
If our immigrants were more doctors than patients or teachers than students, some of the dynamics he describes would not be so. Yes, because of the law of supply and demand.
Why should only the professional have to deal with globalization? We have enough labor at all strata.
Unfettered immigration is a burden on most parts of society. The only beneficiaries of a labor glut are academia, the wealthy, the political class and global corporations.
The two most popular college majors are business, 21.38%, and health professions, 9.53%.
Neither doctors nor teachers want to allow competitors into the US, and they have highly effective lobbying arms.
I’m with you for cultural and voting reasons alone. I’m fine with a full immigration stop for the next half decade or so. That could of course lead to reciprocal shutdowns, thereby keeping Americans from being able to emigrate as they’d like in a number of cases. But still I’d do it.
However, your assumption is not always correct. Bringing in high-talent entrepreneurs leads to more overall industry growth—such as what we have with the number of successful entrepreneurs we have from India in Silicon Valley. They create far more jobs than they take. (Not the case with all Indian tech immigrants, however.)
Can you blame them?
that law applies to wage rates and trying to raise the minimum wage
That's a fools game.
No, but it should not be allowed. If we could get competition in medicine and education, we could cut the excessive costs to those who have to buy these services.
Right. But an auto plant that churns out tens of thousands of cars every year needs to figure out a way to sell them all. If they don’t sell them, they don’t need the production capacity. And if they don’t need the production capacity they will either downsize the plant or even shut it down completely. I don’t think anyone gains in that scenario.
If the car market is in decline shouldn't prices be falling for new cars?
The cost of education has little to do with teacher salaries and everything to do with greed.
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