From: ohumukin@spectra.com (Kawika Ohumukini)
Subject: Re: Income & Wealth
Organization: Spectragraphics Corporation
Date: Wed, 14 Oct 92 15:51:52 GMT

In article <1992Oct13.222413.10375@ads.com> dwang@ADS.COM (David Wang) writes:
>In article <1992Oct12.233845.20297@spectra.com> ohumukin@spectra.com (Kawika Ohumukini) writes:
>>
>>	The constant shift from quantity to quality causes purchasing.
>>
>Huh?  If you can't afford it, don't buy, regardless of quality.  I
>mean a Mercedes is obviously better engineered than say a Hundyai,
>but if you can't pay for Mercedes don't buy it.  And if you go
>bankrupt while buying toys you can't afford, then you deserve to
>pay the consequence.

	I understand that way of thinking and I feel you are right, people
	must pay for what they buy.  And the fact still remains, which has
	been proven over and over through the decades, americans buy what
	they can afford and if they can "obtain" a "better" product even
	though they may not actually be able to afford it in real terms,	
	obtaining the item by credit, they will buy that product.
	For instance, a person with $10,000 cash wants to buy a car.  
	A car selling for $15,000 5 years ago now sells for $8,000 today.
	Does that person buy the car of their dreams for $8,000 and pocket
	the $2,000?  No.  They buy a car that sold for $25,000 5 years ago
	that now costs $15,000, credit the $5,000 and drive home.  

	In another example of quantity-to-quality shift.  Let's say you
	buy a tv with color/cable ready/19" screen.  Then you buy another
	for the bedroom, another for the kids room, and another for the
	study.  You are now saturated, you have met all your tv needs
	right?  Wrong.  Now you go out and buy the same tv but with a
	26" screen/stereo/remote/on-screen editing and start the whole
	cycle all over again.  Why?  Because the bigger better tv used
	to cost $2,000 but by the time you became saturated, in the first
	example, the big tv had dropped in price to $800.  The same is 
	with suits, you buy one $200 suit then several more.  Then you buy
	one $500 suit and won't wear your $200 suits so you buy a whole
	new wardrobe of $500 suits.

	Why is this significant?  Because this very desire of the american
	public to constantly improve their standard of living is never
	ending.   And it is the very thing that makes this country strong.
	Because the whole world wants to please the american consumer and
	will stay up all night, especially in japan, to satisfy that desire.
	This creates global competition and lowers prices and improves the
	quality of products.


>>>High consumer debt is a DIRECT result of people buying the garbage
>>>from TV ads.
>>
>>	Maybe, I think that it is more attributable to lack of
>>	education on how to manage money.  Ask 10 people if they
>>	understand how compound interest works and what it means
>>	in 1,5,10,20 years.  You may be amazed at how many people
>>	have no idea how it works.
>>
>But the ads from TV are constantly urging people to buy....  
>
>>>Another point : why should people that save and create wealth
>>>  be penalized ?  where is the old virtue of individual 
>>>  responsibility ?  If someone spend beyond his/her mean, it
>>>  is an individual problem.  Government has no role in bailing
>>>  out irresponsible individual behaviors.
>>
>>	They should be penalized because by saving they are affectively
>>	taking the wealth of the economy out of the cycle.
>>
>I hope you are just joking.  Take your view to the extreme, say no one
>save anything, where is the capital for investment going to come from?
>Can't have capitalism w/o the capital.  Can't do R&D or build new
>factories for new widgets w/o capital.  Savings create capital which 
>allow the creation of new wealth and invention of new technology.  
>Giving your previous postings, I'd think you understand the importance
>of capital formation and savings in creating new technology and new 
>wealth!
>
>I think over a short time horizon, savings instead of consumption may
>depress the economy, but long term, it is better for society to have 
>more savings ==> lower interest rate, more $$ for new ventures,
>...etc.

	I agree with you here and I don't think I was clear in that 
	one sentence.  The kind of savings I was talking about was
	the "under the mattress" type of savings.  We must absolutely
	have the capital as a nation and don't forget their is some
	japanese investor just waiting to give you capital for a 
	handsome venture which is paid in american dollars.
	
	Cheers,
	Kawika 
Newsgroups: misc.invest