Guest Post: The Devolution Of The Consumer Economy, Part II: Rising Costs, Declining Wages

Tyler Durden's picture

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The Axe's picture

ANF AND TPX AND BBBY  all making new highs,  the consumer seems to have plenty of money to spend...

oh_bama's picture

this guy is way TOO NEGATIVE!!!


theXman's picture

The author is absolutely right. I like Prez Reagan, but one of his main legacies is growing devide between rich and poor and the shrinking middle class.

Obama says that he wants to be like Reagan to change the trajectory of history, but he has failed miserably so far. He has sold his presidency and himself to the financial elite of this country. There is no hope and no change.

oh_bama's picture

this guy is way TOO NEGATIVE!!!

DID YOU BTFD? If so you would have made a ton of money already on SILVER AND STOCKS!!




lynnybee's picture

......& to think that it was all deliberately & purposefully planned to happen just this way.   that's the part that's so difficult for most people to understand...... deliberate policy out of WASHINGTON & WALL ST. 

B9K9's picture

You need to go further back than that; in fact, much much further. Oh, say around 5,000+ years.

Someone, somewhere, stumbled across the notion of exponential math. It must have been a real 'eureka' moment to realize what happens, what MUST HAPPEN, every single time the power curve is realized.

The rest is easy. You've got the majority of the population who aren't much smarter than chimps. You lure them with babels & trinkets - just sign on the dotted line. Once they're hooked, it's like a hauling in a school of tuna.

The only problem is, there isn't any intellectual stimulation involved in the practice. Its not like you're discovering or inventing something new. In fact, it becomes so downright dreary, one must create other diversions & entertainments.

Enter the boom-bust cycle. At the heart of the aggregate financial system, there are only two components (credit & currency) and two states (inflation & deflation). Thus, there are four primary conditions by which one can easily manipulate. Again, not really to garner additional wealth (which already comes easily), but activities targeted more towards staving off boredom.

So they fuck with people, because they have nothing better to do with themselves. Run credit expansion, then let it collapse. Run currency expansion, then let it collapse. So far, we've had credit inflation/deflation, and currency inflation - what comes next?

samsara's picture

Someone, somewhere, stumbled across the notion of exponential math


Yes,  Wages go up in a Linear track.   Interest goes up Geometrically.

queue Dr. Albert Bartlett

Lost My Shorts's picture

I don't understand why everyone is so hopped up about this.  It's the standard prescription imposed countless times by the IMF on banana republics that got too deep in debt:  austerity and devalue.  Why should the USA be different?  Who thought it would be different?  Bernanke is just applying the orthodox medicine.  Driving the dollar down reduces the American standard of living to something more in line with what we produce (i.e. not much).  Isn't that necessary?  How would you avoid that?

depression's picture

Using the reserve currency as a mechanism to export Inflation across the globe, Bernanke is engaging in a form of economic and currency centric warfare.  Rather than launching an ICBM strike, we do the equivalent with our persistent currency devaluation policy.

Lost My Shorts's picture

Bernanke and the oligarchs had two choices:

1) Tell the Euros and China: all that American GSE and bank debt you bought is looking at a 50% haircut.  Your bad for financing a real estate bubble.

2) Bail out all the debts, but devalue the dollar to give them an FX haircut.  (Hey you with the peg, America's not your daddy.  Lose the peg.)

They chose (2) -- better apparently for Wall Street, multinational coprorations, and the rich.  But there was no third choice.  If you don't agree, tell me what was the third choice?

lynnybee's picture

now,how do i argue with this comment ? !   I DID NOT PERSONALLY GO INTO DEBT, I DID NOT CHARGE & TAKE OUT LOANS FROM BANKS ~~ someone, anyone, tell me ......... why must i go into austerity !!! (honest question, please don't junk me) ......... is this when the prudent / honest people in our country go into revolution ?

B9K9's picture

See my comment above. It matters not what you personally wish/want/desire. You are merely a cog, a herd animal in the pen, to be nurtured & supported before harvest.

There are only two financial vehicles (credit/currency) and two states (inflation/deflation). Where do you think you're going to hide when the entire game is controlled? Go into debt? They'll crash the underlying values. Save your 'money' in currency/bonds? They'll inflate away the values.

How about, bail out of the system using PMs, etc? Well, they'll get you via taxes. First property, then whatever else they can think of to make sure all strays are round up and once again in the pen.

Our only possible chance out of this state of affairs is peak oil. The entire underlying model is dependent on growth. The crimes they commit in broad daylight are supported by 'the rule of law'. Take away the basic underpinnings of civilization, and all bets might be off.

lynnybee's picture

now i'm just a cog.   i used to be a citizen, then i became a taxpayer, then, WALL ST. considered me a consumer & NOW ...... I'M A COG ! ?   .......... NO MORE !   off the grid for me / extricating myself from a system that i have no control over.

samsara's picture

Sorry Lynny.  (I love ya btw) we have always been cogs to them.  We just didn't know it. 

Bob's picture

Good luck with that, lynnybee.

samsara's picture

Jeez, I love your posts B9.

Dead on in every case.

How about, bail out of the system using PMs, etc? Well, they'll get you via taxes.

A way for a few is to live outside the system.  Cash/Barter 95% of your business.

As I have tried to tell people,  You have to THINK like an outlaw if you want to survive.

Ask anyone from the 'Raw Milk" subculture who have seen Swat teams busting down doors of healthfood stores.   They now KNOW how and why to think like an outlaw.


Our only possible chance out of this state of affairs is peak oil

That has been my one cheerful thought for the last 10 years,  They CANNOT keep the Global thing going with out Petro.  


(to quote Dylan.  ... To live Outside the Law,  You must be Honest....   )right Marie?


Thanks B9

pazmaker's picture

There is another way out..... I don't feel comfortable talking about it here...but there is another way.


Is that German Shepard as your pic?   Do you train dogs?   Are you familiar with the Belgian Malinois

kridkrid's picture

While it is a little unfair for that person... that person did actually benifit from the illusion.... we worked for companies who sold widgets to people who didn't need and likely couldn't afford them, if not for the ponzi scheme.  We can't escape it.  Not at fault... but a part of the system.

Cruel Aid's picture

I don't do debt either.

Digital age bubble, levered banks and housing rocket (with congressional holy water on it).

Look at the monthly S&P going back to '80.

Nothing organic about it.

Fiat pain is part of this scheme.

Triple top or Fed dream of BTFO seems to be in progress.

I'd love to see that chart in 50 years.


6_7_42's picture

Now is the time to lever up and have inflation destroy the principal. 40yr take out, buy rental property.

Lost My Shorts's picture

In every banana republic that ever flamed out and got the IMF treatment, there were nice, honest, frugal people who didn't cause the problem.  They all suffered with their clueless and/or kleptocratic countrymen.  No man is an island.  Or as the song went, "fools to the left of me, jokers to the right, here I am, stuck int he middle with you ..."

flattrader's picture

>>>I don't understand why everyone is so hopped up about this.<<<

It's just CHS yelling at the rain again.

No new info for us here.  Perhaps for his readership at his blog.

The Tyler(s) can give even the most mediocre of bloggers a bigger soapbox by just posting to ZH.

Eureka Springs's picture

Medicare, or V.A. have problems, but are not the problem... They are the closest entities we have to a solution. SIngle payer or tri-care systems work far better in terms of providing actual care without threat of bankruptcy for those who are sick or injured. And it's done at far lower cost by every country in the world who has it now.

Private insurance in America will always be 20 to 35 percent more in over all health costs than a government billing system.. it is now an will be until we kill it.

Government ( viasingle payer or tri-care) must take our massive pool of 300 million people and bargian down drug prices to or well below what small European country's have done long ago.

We can easily provide access to care for all at half our current overall costs once we quit arguing for profiteers. Get out of the box!

Basic human dignity, public safety, as well as individual and business economics demand this. It's the only way to be healthy and the only way to compete on a civilized playing field.

I'm not even religious and it's plain to see this is the moral thing to do any way one looks at it. Just follow any of the 35 other countries who are far better at this than we... any of them.

Doubleguns's picture

China, Portugal, Greece, Libya, Iran, Ireland, Pakistan, Afganistan, Egypt?

Who are those 35?

thames222's picture

We're next!  Our people are so demoralized right now it's not even funny...even the news that the govt won't be shutting down is bittersweet.

Robert Neville's picture

We subsidize world health care with our high costs. The cost of development is recouped here and the drugs and technology are sold elsewhere for the cost of production and a small profit. The government here is the problem. Ggovernment payments to health care companies, government created insurance monopolies, and tort laws drive costs higher. The way to fix the problem is to end Medicare and Medicaid. Make health insurance illegal and make it illegal to sell medical supplies and technology in other countries for less than they sell for here. Eliminate tort law and make malpractice a criminal offense. The health care industry would have to provide a quality service that we could afford or go out of business. I work on cancer therapy equipment. Treatments for humans cost $85,000. You can have your dog treated for $4,000 on the same machine. The difference is no government payments, no insurance payments, and no lawyers.

tawdzilla's picture

Eureka, You may be barking up the wrong tree:

$60B annual fraud in the Medicare system (2009)

$12.2B annual profit of top 5 insurance companies (2009) 


Eureka Springs's picture

Look over the other successful countries, instead of inside our systemic failed box. When I last checked we spend as a a whole well over a trillion bucks a year for all health costs... that's more than enough by comparisons to many other existing models to provide care for all.


How much of that 60b was fraud/looting of our government while actually providing health care? How much of all privateer insurance actually provides care... they are nothing but a billing grifting entity... an entirely needless anti healthcare middleman.

It can and will never happen with a profiteer model. The goal of lowering costs, or providing care for all will never be the goal of a corporation... there should at least be concerted intent to do so by all of us through our government.

tawdzilla's picture

Devolution (i.e. backward evolution) is the notion that a species can change into a more "primitive" form. 

Go long CQB (Chiquita Bananas.)

the grateful unemployed's picture

there is a bear market in credit, and in a bear market vendors devalue their goods and services. What is a zero APR loan exactly? A loan with no interest.

The economic assumption in the housing market, is that lower interest rates allow the seller to raise his price. The valuation metric is constant. A house is worth what a house is worth. That assumption works when the market for interest rates is not fixed, or it is variable. When an interest rate fixing central bank enters the picture, the free market in interest rates disappears. (As we all know, a banker looks at your application and he decides what rate of interest you have to pay, those who have fewer assets, or collateral have to pay more interest, or points as they call it. Too bad that system went out the window.)

Some consumers enjoy a lower credit card rate than others, and that system works to a point, until the government starts subsidizing their needs, to better facilitate their wants. In the end your credit score doesn't matter, everyone is in the same boat, some just get there a bit differently, (food stamps and section 8 will take you to the promised land just as surely as hard work and a good business model) 

The rich live barely any differently than the rest of us, except with more credit, because they can leverage out their collateral. (What good is more credit in a bear market for credit) They drive the same roads, shop at the same stores, see the same movies. At some point consumerism fades away because, one the collateral is devalued along with the credit that money creates, and two, there is no point in having something if everyone has it. The idea of consumerism is to make your life unique, somehow. The president of Coca Cola (a universal substance in the last century, which spoke about a common experience) said that someday there will be a Coke for everyone. (Imagine the logistics!) Good luck, by that time the consumer society will have ended.

falak pema's picture

The problem is the mindset of Imperial ruling elites in USA both red and blue :

For the reds the NONNEGOTIABLE monopoly/Oligopoly cartels since 50 years have been:

MIGC, OIL, PHARMA, NOW  the biggest : FIRE (WS, PDs, Fanny/Freddie, AIG, GS).

For the blues : Labour Unions, State bureaucracy (health, education, govt.), Entitlements galore. All this through cartel subs.

The mind set ensured, as USA was unquestioned world leader, we could spend unlimited by just printing reserve currency benefitting for extraordinary excessive privilege. 

So once the mind set goes west, the due diligence follows. It has and how! Now, we have no brakes, no checks and balances. And nobody knows how to take the foot off the print press accelerator.

Nobody wants to bites the bullet, admit defeat. The ship has only one destination : straight into the iceberg. Titannical.

pazmaker's picture

Nobody wants to bites the bullet, admit defeat. The ship has only one destination : straight into the iceberg. Titannical.



Instead of biting the about using it for what it was intended for?....I'll leaveit at that and say no more

mcarthur's picture

Look on the bright side.  At least its cost push inflation instead of demand pull inflation.

Djirk's picture

bi flation a supply shock to send inflation over the top and inflate away liabilities....wooo hooo

Bitch Tits's picture

Let's face it, folks - we've been had!

Somehow, the terrorists have won.

Our economy is down the tubes, businesses and jobs disappear every day, homes are lost once somewhat affluent people are sleeping in tents.

And to think that our own banksters sold us down the river for a few pieces of gold! Wow.

tomster0126's picture

the consumer economy is falling apart, Durden's hitting the nail on the head with this one.  I barely buy anything these days and I shop at the cheapest places available for most things I need.  Upping wages is a crucial tactic employers and the govt must use if they want to increase spending and get real liquid pumping back in the economy...until then I'll be holed up eating my cans of tuna and Ak-Mak crackers.