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Guest Post: The Devolution Of The Consumer Economy
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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Non-dogmatic belief would have to be a defensible truth, that is conclusively proven, positive evidence. Knowlage can be tested, faith can't. I am willing to reject my position when faced with the evidence. Believing is not knowing and belief is not knowledge, there just supernatural excuses. Any book the makes extraordinary claims needs to have extraordinary evidence. Faith is without reason. It breaks down the accuracy and Authority. It pushes the limits of gullibility. No evidence= faith.
Wall of text! paragraph much?
consider your reader.
While I may not disagree with your argument from a philosophical perspective, and wholly agree indoctrination is one of our main problems, I believe it starts with government not jumps to it. There is a reason the first act of fascist regime is to indoctrinate the youth. "Religion" comes in many forms. Lately I've been surrounded by another set of closed minded ideologues whose position "is wholly dishonest", and they "defend their preconceived notions" like no other "religion" I've ever seen. While I think they are useful idiots of a far more sinister cause (yes communists), the religion of the "Environmentalist Atheist" has all the markings of a faith that "systematically rationalizes all beliefs" and sticks to it's "sacred stories" . This is not an argument as to whether god exists or not, but is a "religion" that takes the "search for truth", corrupts it, indoctrinates it's followers with just as much fervor (except with a propensity for violence) any more virtuous?
90% of children now go to public schools where they get years of propaganda that would make Che and Mao proud. Atheism is by far the fastest growing "religion" in the U.S, and every time I turn around the resources of government are being used in some crazy lawsuit to rid the world of religion in the name of separation of church and state. I wake up to a wholly immoral and deprave society. If science and this search for truth have these adverse side affects, I'd rather have "magic". Of course that line of thinking is fraught with fallacy, but certainly any open minded person that can make a scientific argument like yours above is smart enough to see that any ideology whether right or wrong, provable or not, is carried out by men, and where there are men, there is corruption and ulterior motives.
While your argument may be unbreakable, and you may win any debate with a theologan on the subject of proving god exists; it doesn't change the fact that I fear the loss my liberties and my property rights daily, and it is not my local preacher or sunday school attendee that I fear taking them away. I will stand with a crazy "believer" that teaches liberty, charity, morality, self reliance and goodwill long before I will stand with evil because they have a few more facts. I readily recognize "religion" has and will be used to coerce behaviors out of it's subjects, what I fail to see is those who are godless recognizing that their belief system is also religion, and the "Pope's" of their religion are pushing a political agenda light years away from any "search for truth".
What about the Keynesian economists that believe as fervently as any preacher? Or, claim to so that they can recapitalize bankers who knew that their 'models' were going to blow up but also knew that their central bank would bail them out on the backs of taxpayers?
Keynesianism is as much a religion as any other non fact based system, and like preachers in other religious systems it demands belief in that which cannot be proven...but now we are in the midst of watching the Keynesian experiment blow up. While Keynesian economists tell us that all is well.
All non fact based systems that rely on faith are bs.
Stuff is out. Gucci is out. Bling is so yesterday. RVs are out. Boats are out. Vacation homes are passe. McMansions are old hat. Apps are where it's at.
Is there an app that tells me what apps i need?
Employment is out, American built products are out,
seeing a healtcare pro is out,honesty,law and justice,all out,
US constitution is out,
A government job and benny package, that is IN!
Well... data (a ZH article [sribd ref] from the other day) suggests that govt jobs are down. There was a brief spike (to offset the collapse by the private sector, brought on by the financial sector [which is in the private sector]).
Law and justice out? Quick, let's go talk to some native American Indians and see if that's really true...
Consumerism is dead because GROWTH IS DEAD! Yeah, any moron could see the natural progression (private sector crashes and then the public sector, because, well, because people are social and tend to rally together, tries, but it's all futile). But myopic idiots will continue to play up the "it's the government's fault" story to help their master make off with yet more loot. Only in American can people making $1 million/yr tell those making $40k/yr that those making $20k/yr are their oppressors.
Hook, line and sinker.
Seeing how brevity is the soul of wit- I'll simply quote GKC "if there were no God, there would be no athesists"
I thought it was "if there were no God, there would be no war"?
But if their were no atheists their would still be a God?
The latter proves the prior.
God is, despite our mental wanking.
No gods, no masters. Keep slavery alive!
"If there were no flying spaghetti monsters they're be no people!"
Can anyone here honestly tell me that anything they've purchased has ever brought satisfaction, let alone happiness?
Or what about satisfaction for more than 2 minutes, hours, days or months from the time of purchase?
Habituation. It's a bitch.
Now, I have passions. And the tools or instruments I purchase that help me develop or pursue those passions bring me satisfaction. But not because of the purchase, but rather the 'what' I'm doing with the purchase. And that's entirely different.
There's a guy who started what's now a popular movement called '100 things.'
The basic premise is that you'll be happier if you commit to reducing your possessions (yes, all of them) to 100 things or less. Everyone who has signed up and followed the rules has stated it's simplified their lives, allowed them to focus on their passions, saved them money (which has liberated them from stressful jobs or stressful extra hours), and actually allowed them far more time to engage in rewarding activity or time spent helping others.
Stoic Philosophy, beeches...
But seriously, those guys figured it out 2500 yrs ago
Epictetus, born a slave, philosophy tutor to Marcus Aurelius. Very accessible collection: http://www.amazon.com/Art-Living-Classical-Happiness-Effectiveness/dp/00...
Beautiful stuff... I am teaching my 14 yo son the basic ideas of the stoics, and, bless his soul, he gets it...
"Can anyone here honestly tell me that anything they've purchased has ever brought satisfaction, let alone happiness?"
YES! I love my motocycle more than any woman. It never complains when I ride another bike, its always ready, always exciting to ride, and when I am done I blast it with the pressure washer and chain it up in the garage until the next ride. It is worth every penny, even all the medical bills.
Edward Bernays would be proud.
i was pretty satidfied with that last foil of crack i bought.
Things I've purchased that gave me great and lasting satisfaction: welder, table saw, carbide saw blade, tile cutter, tungsten carbide scraper, and HP35 calculator.
Things I've puchased that have pissed me off: anything made in China.
As much over-consumption as we've had we will also have an extended period of under-consumption where the reality of the vast squandering will hit hard. Some of the curtailed spending will come from the realization of what's been wasted in the past, some will come from no longer having access to cheap voluminous credit.
This is what I've been talking about since 2000. People driving expensive cars on 72 month loans while wearing expensive clothes charged on credit all the while not having a pot to piss in. The lunacy of walking into a dealership and rolling over a loan on your underwater trade-in while buying a new vehicle...and the request.."keep me at the same monthly payment." We've been cooking this recipe for disaster for a long time now.
And we are merely in the opening round of this particular contraction.
America is waking up to the fact that you don't own stuff, it owns you.
IMO, it's going to take a generation or two to get used to this fact, and it won't be pretty
"Owners of capital will stimulate the working class to buy more and more of expensive goods, houses and technology, pushing them to take more and more expensive credits, until their debt becomes unbearable. The unpaid debt will lead to bankruptcy of banks, which will have to be nationalized, and the State will have to take the road which will eventually lead to communism." Das Kapital, Karl Marx, 1867
"you are only as free
as that which you can
walk away from" ...
The bankers and the rich are using the stock and commodity exchanges to transfer the wealth from the rest of the population to themselves. They first buy the stocks and commodities and then increase the price of everything the rest of the population consumes (commodities) or saves (stocks) by circular trading and using derivatives. This reduces the maximum of the population to lower their standard of living or leads them to buy overpriced assets.
The stock, commodity and currency exchanges have been reduced to gambling dens whereby the more powerful traders with deep pockets move the markets to maximize their own profits at the expense of the remaining not so powerful players. The big boys have enormous money power to move the markets in the direction which results in maximum profits for themselves. They effectively use the media to lure the other players in the market to a position where they would incur maximum loss.
http://www.marketoracle.co.uk/Article24581.html
Remember this one, Consumer Metrics online durable-goods sales is back down to -6%.
http://consumermetricsinstitute.com/index.html
It rose off its previous -6% low with the QE2 announcement ... now back in the swamp.
Obviously need QE3 to be about $1.8 trillion bernankes to get this sucker to float
Collectively we have been sold the line that we should expect instant gratification of our desires.
This allowed the PR men to also sell us the rider that we could do it all on credit, as we sought mortgages for mcmansions, loans for cars and boats, credit cards for fancy clothing and expensive restaurant meals.
It allowed the banksters and their tame analysts to push the idea of leverage so that companies would borrow to build bigger production bases to satisfy our hunger for consumption.
All of it based on selling our tomorrows to the banks rather than saving our cash today.
What next after we have sold all the future work we can do? Do we start selling our children into indentured service?
I have paid my way out of this. I had a few credit cards - all maxed. Now all paid off. My only remaining loan is my mortgage (and is less than the current value of my house). I will pay it off early to finally escape debt serfdom.
I save. I buy some gold and silver. From now on anything I buy comes out of savings or current income. And I will not be buying every latest gadget or geegaw. No storage rental. If it doesn't fit in my space I won't own it.
I have a good job, paying well. But it depends on other's consumption so one day I might need to start over. I make sure if I have to I can. We buy local food only and visit the places it comes from so we know it will still be there and not dependent on some fragile supply chain if and when the sky finally falls.
My city-born wife is learning skills for a truck farm. I have learnt how to services a car or build a house.
But I still think the transition years coming up are going to be painful.
Necessary, but painful.
The trick is going to be building a future that allows us to be independent free-thinkers, when the elite and the banksters will want us to build a socialist future so they stay in power.
Just to be clear - saving does not mean leaving cash in the bank or stuffing it under the mattress. I make my savings work hard to stay at least level with the real inflation rate.
Also I hate the banks and I don't want to give them anything to feed their fractional reserve banking.
I am John Galt (6/07)
But then the DJIA is appartently at these levels
because of record profits by corporations ? So who is buying
aall the " stuff " ?
US Military is buying a lot. US Gov is employing a lot of people. US Gov is spending a lot on social programs. US Treasury is asking the Fed to print more bennybucks to pay for it.
The rub comes when bennybucks are no longer accepted for commodities. Fed/Treasury/Gov cannot create commodities out of thin air.
Reserve currency status backed by Tomahawk missiles and Predator drones.
The BRIC countries. And Asia.
the real pleasure is in real ownership, having stuff you don't own has been a great lesson. some folks will wait till their 80 untill they finish paying for all there stuff house, car etc, maybe their'll have a year or to to mull over what was that all about, we come into the world with nothing and take out nothing, status is not important, living within ones means is a discipline to learn and gives you self worth, riding around looking flash in cars or fancy homes that will never be paid for is a teenage dream, time for a lot of folks to grow up and pay the piper. why should savers have had to bail out these sorts of people that are truly worthless and of no value, hard work and then reward is the natural order, not have now and pay later.
When you think about all the taxes and gov't fees that a car generates:
Now you see what Obama sees, and why he wouldn't let GM & Chrysler go down.Now you see what Obama sees, and why he wouldn't let GM & Chrysler go down.
You forgot union dues.
I hate these essays. Everything gets lumped into consumption and it becomes this amorphous blob of undistinguishable items and services that taken in totality some half-wit will interpret for you as "unnecessary". You can increasingly buy more and more with less and less. That's scorned as terrible. Nevermind that even the lower middle class in the West live much better lives than the kings of old.
Hate to say this, but under the current slave rag fiatsco garbage currency called money these days, the biggest losers are the ones that diligently save their money in that slave rag itself. It's obviously unsustainable. But when the slave rags die, the stuff will remain.
I think the big flaw with consumption based economics is we measure flow of anything whether it adds future value or not. Consumption is all in the now. Consumption is king.
So if the government spends money on nonsense just to create consumption this is good right?
"THE LESS YOU "OWN", THE LESS YOU SUFFER"
Yakmerchant wrote:
What I fail to see is those who are godless recognizing that their belief system is also religion.
Correct. A Christian fundamentalist is just as convinced of his position as the atheist.
Both are fundamentalists.
Rocky Racoon wrote:
I contend we are both atheists. I just believe in one fewer god than you do.
I attend a Unitarian Universalist congregation and Chabad, an orthodox Jewish (mystical) denomination.
I must confess I am an atheist at least 10 minutes every day, as well as an orthodox Jew, part of the time, and everything in between.
Regarding gods, it was stated by God Himself that to have gods, to have passions and interests that we hold on to (too) tightly is okay.
I believe He did this knowing of our limitations, and due to His sense of humor.
Just remember to put into first place God Himself.
The commendment You shall have no other gods before me.
The meaning - it's okay to have gods AFTER me!
Shalom,
Don Levit
I am totally agnostic and have been for decades. There is no way my puny intellect can solve the question(s) about any god, let alone the established ones. Frankly, it's not a situation I ponder unless brought up by others. I guess you could say that I just don't care.
Smith is a great writer.