Wednesday, September 10, 2008

Inverted economy

This morning, whilst watching the news, I was once again surprised at the magnitude of human stupidity, or my own ignorance over the Big Picture. I'll ellaborate...

In two >apparently< unconnected articles, they announced economic measures consciously put into place. The first article spoke of those controlling the price of petrol and how they've decided to hold petrol production in order to stop the decrease of petrol prices. I still hadn't recovered from my amazement when the second article, (immediately after the first though relation was ever mentioned) several car manufacture corporations have decided to reduce production of their vehicles (hence reducing their staff and the routers) to combat the loss in sales and keep the price tag.

A good friend of mine was explaining to me how she thinks she remembers how a theory was explained to her by which under a very specific set of circumstances (which are not the current ones) this may actually work positively. This is what they call Inverted economy. I've searched but I've been unable to find almost anything on this.

I must be really dim on this subject (I've never studied any economy) but there's a few points in which are completely illogical. The first is on the law of supply and demand with respect to the manufacture of cars in today's economy.

The main reason why people are not buying cars is that there is an economical crisis (we'll argue that some other day), that is, the people who are supposed to buy these cars doesn't have the money they cost. The reasonable thing to do would be to lower the cost of cars to promote their sale. There are thousands of ways to do this, of course, from cheaper materials, cutting down profits, manufacturing optimizations, etc. But, of course, How could we possibly cut down our profit? yells the horrified CEO. Since they don't actually share the profits when the going is good, why do they share the debt by killing thousands of jobs, hence making the crisis worse? More jobless people means less money to buy cars. Remember that the pricetag has been mainained but we've ended up with a worse economy state. Sirs, I don't get it. How does that help sell more cars?

But the one about holding fuel production to stop the prices going down is a real cracker for me. Last time I filled my tank I was pleasantly surprised when I saw the price per litre. I saved almost 3 euros! 3 euros is not much, but multiply it for the amount of people getting gas! One would think that lowering the price promotes sales. More sales, more profit, right? So now the prices are dropping, lets hold production, we generate mass panic by making people think they will run out of petrol, queues on petrol stations of people filling up, we create an energy deficit and so we raise the prices. It is true sales go through the roof for a couple of days with those panic attacks (I usually just park my bike and wait for it to blow over... it allways does), but people are choosing to use the car less because of fuel prices. Just look at the numbers of dead people on the roads!

Oh! That's right, they've gone down because we're more consientious drivers and we are fearfull of fines... riiiiight...

Come on, dude!!!





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