Guest Post: The Devolution Of The Consumer Economy

Tyler Durden's picture

Submitted by Charles Hugh Smith from Of Two Minds

The Devolution of the Consumer Economy

The U.S. transformed into consumer economy that is exquisitely sensitive to debt and the costs of servicing credit. In other words: the bill is finally due, Baby.

One of the foundations of modern economics is the belief that insatiable demand for more goods and services is a permanent feature of humanity. This is also the basis of that other foundation of modern economics, the extension of credit so consumers can buy more now than their savings would otherwise allow.

It was a match made in Heaven--insatiable demand and nearly unlimited credit. Want a shiny new car, but have saved no cash? Not a problem. It will only take a modest monthly payment for 5 years (or longer) to indulge your impulse to have a shiny new vehicle to reflect your individual glory and unique personality (never mind the vehicle is mass-produced; it was "customized" just for you).

The "invention" of mass-marketed credit was one of the great innovations of capitalism. In the Depression, my grandfather paid $1 a week toward my Mom's first bicycle. The town's shopkeeper extended the credit, took the risk of non-payment and earned the interest.

Credit in modest amounts has positive features; with cash in short supply, the storekeeper probably had to extend credit just to book enough orders to keep the doors open.

On the consumer side, if servicing credit costs $1 out of a weekly paycheck of $25, then it's a modest tradeoff with substantial benefits.

In the late 1960s, a new innovation appeared: credit cards, a magical rectangle of thin plastic which enabled consumers to buy virtually anything they desired right on the spot. "Impulse buy" became a reality for anyone who qualified for the magic card.

There is of course a "marginal return" aspect to consumption. The first piece of chocolate cake is heavenly, the second is rewarding, and the third, hmm, no so amazing. Each succeeding piece carries a higher cost and a lower reward/return.

Thus is consumer ennui born. After a steady diet of continuous buying and consumption, the consumer finds less and less satisfaction from the ownership; soon, only the act of acquisition/purchase creates the "high" of satiation and excitement.

Alas, this hit of self-renewal and self-expression via consumption is also prone to habituation. The satisfaction of buying something new only lasts a brief time, a period that becomes shorter as the purchases pile up. Like the rat on the wheel in the cage, it becomes increasingly difficult to buy enough to keep the high going.

There are also some practical limitations, such as where to put all the crap you've bought
. Luckily, ever-resourceful capitalism has the answer: self-storage units, which act as "cheap" extensions to store your valuables.

Maintenance costs are another bedeviling practicality. The fun boat must be moored or stored, the third car/truck's insurance must be paid, the vacation home's water lines froze, and the languishing spec house's property taxes--mysteriously higher every bill--must be paid lest the investment to date be lost entirely.

So there are two problems with the consumerist paradise that is the foundation of the U.S. economy. One is that people slowly awaken to the realization they don't really need additional goods and services, as their attention becomes focused on preserving their access to those they suddenly value, such as shelter, food and electricity.

In moving (out of a foreclosed house or on to another job, etc.) they suddenly feel the great freedom of no longer being enslaved to all their stuff; they realize it owned them, not the other way round.

In having to come face to face with their mountains of "cute blouses," old electronic toys, busted Ikea furniture, bicycles nobody rides, etc., then they slowly realize the return gained from buying all that stuff was increasingly marginal.

They might also awaken to the reality that partly why they have no capital or assets is that they squandered much of their income on instant gratification and marginal-return toys of various sizes and shapes, and costly "experiences" such as fine dining and cruises.

It is perhaps no coincidence that the wasting disease tuberculosis was once known as consumption.
A single-minded focus on consumption is wasting to assets, income and the soul, and it eventually hollows out the economy built on its reedy, rot-riddled pillars.

Eventually, the costs of servicing the ever-rising debt and maintaining all the stuff exceeds the income of the consumers.
I think we're approaching that point as housing declines in value and the costs of credit are rising, despite the Fed's claim that it can hold interest rates near zero forever ("Away, tides, I am Ben Bernanke and I speak for the mighty Fed!")

So what happens when demand stagnates and credit is denied or renounced?
For one thing, all the stuff which people can no longer afford will be dumped, as correspondent E.P. recently noted in an email:

Debt/credit is such a distorter of the reality of value and economy. It is so hard to find realistic sellers. I just offered $15k on an older boat to which the seller laughingly responded 'you know the asking price is $50k?'. I nicely mentioned asking prices mean nothing these days and there simply aren't enough uberrich to buy all the luxury assets floating around. Its been sitting there for nearly a year...along with several homes we've made appropriate bids on that often eventually sell for less, or are still sitting there, empty. Simply amazing.

Do you foresee stockpiles of cars/boats/planes in the coming years? A colleague mentioned if we remain patient and wait long enough these things will be available at no charge, simply to be able to afford the maintenance and operation costs....

Presciently said, E.P., thank you. I would add houses to the list.

Everyone who is currently confident in high-inflation-hyperinflation is recommending buying tangible assets. Perhaps that should be narrowed somewhat to tangible assets with a positive return on investment. It seems very likely that the U.S. will be awash in surplus boats, yachts, cars, trucks, houses, exercise machines, etc., as the "owners" (if you bought on credit, and it's now worth less than you owe, then what do you own?) will no longer be able to pay the slip fees, registration fees, insurance premiums, mortgages, property taxes, storage unit fees, etc.

No, conventional economics, demand is not insatiable or permanent, and neither is credit expansion.

The endgame of consumerism is one of the many topics explored in my book Survival+: Structuring Prosperity for Yourself and the Nation.

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Boilermaker's picture

You mean I really don't need to spend $799 on an ipad2 along with an additional $40 per month data plan?

No shit?

prophet's picture

"... hold your member ..."

Michele Bachmann at 1:27

or John Larson

"so small they could drown it"

http://www.msnbc.msn.com/id/3032619/#42462560

Josh Randall's picture

Posturing - all those @ss clowns are playing out this drama for their masses, meanwhile kids, women and men get to go defend America in Afgahanistan, Iraq, Libya, and every other place but America. So Bachman, Larson, and everyone else in that clip can sit on it and rotate

RafterManFMJ's picture

HeeHeeHee yes, just the other day I witnessed Afghan MIGs strafing my small town. How lucky I was they didn't spot me, hiding in the foothills of Western PA.

Oh, and BTW I'm pretty sure our military is voluntary so if you have to get some trigger time in, don't whine about having to hump the bush. K?

snowball777's picture

True enough, they cling well and often in PA, but how many of those 'volunteers' are doing it for citizenship or access to college? There are a number of reasons one might find oneself deployed like the peeps who get stop-lossed into extra time after having done their duty.

Blame the CiC and the guys with the stars and bars, but not the damn troops. Mmm'K?

williambanzai7's picture

I recommend the bare bones model. No data plan, wifi is all you need and minimum memory. Buy it extra gigabytes and you will fill it with more junk.

Same goes for everything else, skip the data plan and forget the extra space.

pan-the-ist's picture

Good riddance to consumer capitalism.  It doesn't fit well with our 'service' economy because you can't fix the junk produced by it.

BorisTheBlade's picture

I'll maybe buy one if AAPL puts a Geiger counter in it.

snowball777's picture

Much like calibrating and nulling out the compass, it will involve swinging the expensive AAPL product of your choice violently around your head in a Dr. Gonzo homage to swatting imaginary bees.

lynnybee's picture

I am deliberately purchasing less as a protest.   Any xtra money I get goes straight into metal or foodstuffs.    ......... funny, we were good enough to buy all the stuff that corporate america peddles, but, we're not good enough to be employed by them anymore.     they want that entire spread for themselves.     On that note, I protest.    No more nothing !   I'm extricating myself from the system.    I'm even going to start a garden for the first time in my entire life !! ~~~ & coming from me, a person who hates dirt & bugs, well, that's really saying a lot.

Missiondweller's picture

Me too. I'm buying PM's with my spare money and growing a "victory garden"

Mark McGoldrick's picture

Me, too.

I'm buying ham seeds. 

I'm also taking tmosely's advice and filling every crevice in my house with dried pepperoni. 

 

pods's picture

Okay, Ham Seeds is funny.

pods

I think I need to buy a gun's picture

u guys are g*d d**n right!!!!!!!!!1

johnnynaps's picture

Same here. Only neccessities and alcohol (which in this crazy world is a neccessity). No more voting for me either.

RafterManFMJ's picture

Just picked up a copy of The New Pioneer magazine, main article "Buy and build your own 10 acre Dream Farm." Can't wait to read it. I disagree with the no voting as I've decided I will vote for the most criminal trash I see on the ballot, all the faster to bring this demonic Ponzi down. Vote Obama, or whoever gets trotted out; let's auger this fraud of a nation into the ground!

Blue Vervain's picture

......... funny, we were good enough to buy all the stuff that corporate america peddles, but, we're not good enough to be employed by them anymore.

Well put.

And stick to it long enough, you get used to the bugs.

SilverBoy's picture

I feel the exact way and you have worded perfectly.

tarsubil's picture

I feel exactly the same. Stocking up and not buying junk is a form of protest. It's also anonymous and silent but deadly.

Monday1929's picture

Same here. Boycott the economy.

No settlements for the mortgage fraud- PROSECUTE the bankers and servicers.

Huskybritches's picture

"It's also anonymous and silent but deadly."

 

Somewhat like an economic fart of sorts.

konputa's picture

Make sure you buy with cash. They might come after you if they notice a pattern change with your card purchases. It's one thing to see a decrease in purchase volume but it's another to see a shift in behavior.

krispkritter's picture

+1. Couldn't agree more and started thinking that way several years ago. And if you don't like dirt then do hydroponics or aquaponics. No dirt, fewer bugs. You can do it cheaply, reliably, and don't need expensive chemicals. Everything from ph control to nutrients can be done with cheap or free, natural resources, you know, like nature does it.  Getting back to fundamentals of growing food, preparing it, making your own stuff, fixing things that broke, etc. is really much more relaxing than watching another episode of Dancing With The Idgits(DWTS; Don't Watch This Shit). Funny they call it 'survivalism' or 'homesteading' or something along those lines now. In the country or most other areas(50+ years ago) most people just called it 'living'.

lynnybee's picture

p.s.  CABLE T.V. DISCONNECTED & GONE ! ....... . & it feels great !

Michael's picture

Good job LynnyB,

Virtually all TV reporters are card carrying members of the Council on Foreign Relations (CFR agents). They are defacto employees of the globalist international banking cartel pushing the new world order/one world government, and doing it in a very sneaky way. I prefer to keep USA national sovereignty and the US Constitution in place thank you. Stop watching TV people.

Mark McGoldrick's picture

No doubt about it, you're a paranoid schizophrenic. 

Is this a requirement for all libertarians, or is this just specific to many of the libertarians around here?  

A Nanny Moose's picture

So fucking what?

Junked and claimed.

Michael's picture

It's specific to people who understand the mechanics of how things really work. Put whatever label you want on us. Those labels go in one ear and out the other with no effort whatsoever.

Mark McGoldrick's picture

Those labels go in one ear and out the other with no effort whatsoever....

Not surprising. 

No roadblocks on that route. 


Michael's picture

I love rattling your kind of peoples cages. Your egos are so easy to play with. Thank you for doing exactly as I intend. Please don't change a single thing you are doing. I fully intend to make history repeat itself to the letter. Don't forget to cross a single t or dot an i. It would be very disappointing to me if you altered my time line. Thanks.

DEA's picture

is Mark McGoldrick one of those pentagon sock puppets I keep hearing about?

http://www.infowars.com/pentagon-sock-puppet-trolls-attack-alt-media/

jeff montanye's picture

i thought "ham seeds" sounded suspicious on several levels.

savagegoose's picture

just cuz you are paranoid doesnt mean they arent out to get you.

lynnybee's picture

......... ditto to what you say ..... i'm always in agreement with you, Michael (truth-teller) .

Michael's picture

Even though I don't post much anymore, I do read comments and enjoy your input Lynny B. Thanks.

Bringin It's picture

Michael hits the nail on the head again and again and again.

Funny, as fast as I tried to reply, you got flack from the defender-brigade ahead of me.

Edit Re. Funny, as fast as I tried to reply, you got flack from the defender-brigade ahead of me.

There was and it's gone??  How does one delete a post?

Rick64's picture

 Another plus is when they constantly call you to hook it back up, and you tell them you don't watch t.v.. There is usually a pause then "you don't watch t.v.?". Its so unbelievable to them. I stopped watching all t.v. 15 mo. ago. Its liberating and an automatic boost to your intelligence.

DEA's picture

I've been off the box for two and a half years. When these box watchers tell me what they spend their time watching its hard for me to believe, and to think I was once like them, but now I see.

Bringin It's picture

I could not agree more.  Turn off the box.  It can only harm the viewers remaining cognitive abilities.

TemporalFlashback's picture

It truly is a rewarding experience... Almost hard to describe because some people cannot imagine life sans television.

RafterManFMJ's picture

Been off the box for 4 years now, typical conversation with a friend goes like this:

"I know you don't watch TV, but there is this show..."

I marvel how much time people watch the idiot box, and also how much time they discuss what they watched. Only a lunatic would discuss fictional programs again and again...yet most 'mericans do just that.

Oh, and by the way, we won WWII; you really don't need to watch the 53rd show or History Channel piece about it; I begin to think it's intentional, to keep Americans thinking we still are relevant and powerful...colorful dope for the dopes.  If you're keeping track, I'd say we are about 0-11 since WWII...

jeff montanye's picture

are you forgetting glorious granada?

tired1's picture

I'm waiting for a History Channel show about the glorious Khazarian Empire.

MisterMousePotato's picture

I haven't owned a television since 1984, when my dad gave me one. In turn, I gave it away a few months later. I have to confess, though, that I didn't give it away because I didn't like TV. I did so because I liked TV too much. I would still be awake at 4:00 a.m. watch Gilligan's Island reruns if I had one. I did kinda miss it now and again, at least until the internet finally matured. Now? Meh.

RockyRacoon's picture

"A man's gotta know his limitations."  -- Dirty Harry

http://www.youtube.com/watch?v=_VrFV5r8cs0

 

MisterMousePotato's picture

I haven't owned a television since 1984, when my dad gave me one. In turn, I gave it away a few months later. I have to confess, though, that I didn't give it away because I didn't like TV. I did so because I liked TV too much. I would still be awake at 4:00 a.m. watching Gilligan's Island reruns if I had one. I did kinda miss it now and again, at least until the internet finally matured. Now? Meh.

MisterMousePotato's picture

I haven't owned a television since 1984, when my dad gave me one. In turn, I gave it away a few months later. I have to confess, though, that I didn't give it away because I didn't like TV. I did so because I liked TV too much. I would still be awake at 4:00 a.m. watching Gilligan's Island reruns if I had one. I did kinda miss it now and again, at least until the internet finally matured. Now? Meh.

snowball777's picture

http://www.youtube.com/watch?v=80zkcGiYv9Y

"...so I just stare at the stain on the wall where the TV'd been,

but ever since we've moved in it's been empty."