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Living in an Illusion: Understanding the 'False Demand' Phenomenon in Today's Economy

James Huang | 2023.08.11

In the current dynamic era, our economic perspective is shifting quite radically. Although scarcity was a pivotal concept of traditional economics that held that human wants for goods and services could exceed the production ability to satisfy these wants, today's world view provides a different outlook. 

In our actual world, rather than a lack of money or production capacity, the fundamental problem lies in the uneven distribution of money and the shortfall of demand. The world is actually awash with money; it has manufacturing capability in super-abundance. Yet the demand is insufficient. 

Our misunderstanding of the economical situation lies in our restricted self-centric perceptions of our wants. There is a gap in between our desire and actual purchasing or paying capacity. The post proposes the concept of "false demand", underlying those wants for new phones, cars or other commodities for which the person doesn't have enough money to pay. In such cases, these demands are not real from an economic point of view but just are illusions. Only paying money or demonstrate the ability to pay in the future can turn a desire into a demand.

This discrepancy of supply and demand has resulted in an economy where despite the concentrated wealth and thriving conditions of various industries; there is a lack of job opportunities, increasing debts, and escalating asset prices. A large number of people, despite their willingness and readiness to work, fail to find a job that would afford them a decent lifestyle.

A snapshot into the uneven distribution of wealth uncovers the growing disparity where the top 20% holds 120% of the wealth in some developed countries like the USA and the bottom 80% struggles with -20% i.e., too much debt. Attempts to sustain our economic machine lead to the Government borrowing more. But this just increases the national debt and underscores the supply-demand imbalance.

With an overwhelm of product supplement and a crunch of liquidity, innovation becomes an imperative. Within this macroeconomic scenario, phenomena like dependence on future potential, over-crediting, financial speculations, and reliance on tech breakthroughs are intrinsically linked.

This economic examination emphasizes the necessity to broaden the lens through which we perceive our economic circumstances. Fundamentally, abundance coexists with scarcity. While consumers are struggling, some sectors of the economy are thriving. Therefore, as per the new principle, to keep the economic wheel spinning, demand doesn't need to match supply; it just needs to exist in some form and channel. 

In the long-run, real or not, demand has to be backed by purchasing power. Only then can the wheel of economic activity spin continuously and even accelerate. Until then, illusion or false demand is what keeps the wheel barely moving. This is a wake-up call for us to re-evaluate and re-organize our economic perceptions and principles to align them with the real-world scenario. The conundrum of maintaining balance between supply-demand and debt certainly calls for deeper attention and rectification, but till then, illusionary demand acts as an inconvenient, temporary rescuer. 

Living in an Illusion: Understanding the 'False Demand' Phenomenon in Today's Economy
MERCURY TECHNOLOGY SOLUTION, James Huang 11 August, 2023
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