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Guest Post: 2011: The Last (Debt-Consumerist) Christmas in America

Tyler Durden's picture


Submitted by Charles Hugh Smith from Of Two Minds

2011: The Last (Debt-Consumerist) Christmas in America

The end of debt-based affluence: welcome to The Last Christmas in America (TLCIA).

Almost 35 years ago, as unemployment rose toward 10%, the January 1975 cover of Ramparts magazine blared: The End of Affluence: The Last Christmas in America. (TLCIA)

The article wasn't referring to the religious celebration; it was referring to the postwar concept of Christmas as the frenzied, exhausting year-end pinnacle of our one true secular faith, Consumption, a final orgy of buying and binging.

It is instructive to recall how the Federal government responded to unemployment, high inflation and rising budget deficits in the early 1970s: it began fudging numbers, manipulating data to mask the politically inconvenient realities of rising inflation, unemployment and deficits by playing switcheroo with Social Security Trust Funds, inflation data, etc.--games it continues to play in 2011 to cloak reality from the media-numbed public.

The market was not so easily fooled. The Bear market, reflecting the "real" recession, lasted 16 years, from 1967 to 1982. Now statistics are echoing that last great recession: rising prices for essentials, systemically high unemployment and stagnant wages while the corporate media and the organs of statistical manipulation (a.k.a. the sprawling, putrid public-private cesspool of the Ministry of Propaganda) trumpet "the return of growth" and skyrocketing corporate profits.

(Today's propaganda: housing starts blip up due to statistical noise, and though starts are less than half pre-recession levels, this is heralded as "evidence" that "strong growth is back.")

The difference between the postwar boom of 1946 and the boom that followed 1982 is the last boom was based on the explosive expansion of debt. People didn't save and invest in productive assets; they went into debt to consume more and to become a "bigger" persona via the miracle of credit.

I often use this chart to make this point: if credit had expanded along with GDP, then we'd be considerably less indebted. Instead, it required a vast expansion of debt--some $30 trillion more than the rise in GDP--to fuel the 1982-2000 boom.


A funny thing happens when you depend on expanding debt to fund your consumption: eventually the cost of servicing your rising debt reaches the limit of your income, and you can't borrow any more, unless interest rates decline so you can leverage your income into higher debt.

Here's a chart of household debt: that little reversal in debt expansion sent the economy into a tailspin.


Lowering interest rates extends the era of debt-based consumption, but it only puts off the inevitable crash when the ability to borrow runs out. Eventually the cost of servicing this lower-interest debt absorbs all your disposable income, and the borrowing skids to an abrupt stop.

Two other bad things can make this dominance of debt servicing worse: your income can decline, and the value of your assets can decline. In this unfortunate situation, you're ability to service your existing debts is crimped by a loss of disposable income, and you're paying for assets whose worth has fallen below the debt taken on to buy the assets.

Income has declined significantly in the wake of the 2008 crisis/recession:


And here's the key asset of the middle class, housing:


This double-whammy of lower income and lower asset valuations is exactly where we are now. This is why the Fed's campaign to lower interest rates to zero and make it easy to borrow more have been as successful as pushing on a string; the economy is choking on over-indebtedness and overleveraging of stagnating income. There is no escape from this vortex except refusing more debt and writing off existing debt, wiping it off the balance sheets as an asset, driving lenders, banks and those holding debt as assets into insolvency.

As we saw yesterday, the velocityof money--that is, money actually being borrowed and spent or invested in the real economy--has plummeted to zero.


We all know the 16-year recession/malaise back in 1967-1982 had a "happy ending": huge new oil fields were discovered in Alaska, the North Sea, West Africa and elsewhere, ushering in a renewed era of cheap, abundant petroleum. President Reagan "saved" Social Security for a generation by raising contributions paid by employer and employees, and he heralded a "lower taxes, higher permanent deficits" ideology that is now accepted as the norm: deficits don't matter, even when they reach the trillions, because our good friends the Gulf Oil Exporters and Asian exporters will buy all our debt forever, keeping interest low forever.

(And if they drop the ball, then the Federal Reserve will print money and buy the Treasury bonds. Sweet! We don't need any external buyers, just the Federal Reserve.)

Then the U.S. created and launched two revolutionary technologies which both created new wealth around the globe: the personal computer (microprocessor and cheap RAM) and the Internet (TCP/IP, Ethernet, and the commercialization of Tim Berners-Lee's World Wide Web with free browsers) spawning the generation-long boom of the 1980s and 90s.

Beneath the surface of this innovation-driven boom, however, the real engine of growth was debt and the financialization and globalization of the economy.

But when the wheels fell off that debt-fueled boom in 2000, the U.S. did not create a new engine of wealth: it opted instead for a devilishly insidious simulacrum of wealth: debt which rose at an exponential rate throughout the economy.

Borrowed money and phony financial legerdemain (mortgage-backed securities, derivatives based on the MBS, etc. etc.) from 2000-2007 created what I have termed a "bogus prosperity": no actual new wealth was created, only a brief and doomed bubble of debt-based housing valuations was inflated which followed the classic model set down by the Tulip Craze in Holland hundreds of years ago: insane boom, crushing bust.

We have to revisit the early 1970s for a reality check. In post-industrial America circa 1970, a huge surplus of food was grown by a mere 2% of the workforce. The cornucopia of manufactured goods was produced by about 20% of the workforce (hence the phrase "post-industrial"), and other than essential government services like the Armed Forces, police and the courts, the rest of society's work was either service-oriented paper-pushing relating to affluence (insurance), do-good selfless work (Peace Corps, churches) or leisure-related: entertainment, films, travel, amusement parks, stereos, etc.

This was not all fantasy. A friend of mine supported an entire house of hippies in late-60s Pittsburgh on his union steelworker job, and had plenty of money left to save for his trip to San Francisco. (As I recall, the rent for the big old house was less than $200 per month.) Hippies were the first ardent dumpster-divers/scavengers, driven not by poverty but by the idea that since that our society generated so much waste and surplus, why bother working?

As noted here many times before, the purchasing power of American wage-earners reached a plateau around 1973 and has been declining ever since.

One key point which is usually overlooked when comparing "The Last Christmas in America" circa 1974 and TLCIA circa 2011: the wealth distribution in the U.S. was much flatter then. CEOs of financial institutions did not earn $10 million each; there were no hedge funds with chiefs pulling down $600 million each (yes, that was the average "compensation" for the top ten fund managers at the hedgies' glorious peak), and even minimum wage ($1.60/hour in the late 60s, I know because my wage stub recorded it) bought far more goods (purchasing power) then than minimum wage does now.

Not only was gasoline cheap, but housing was far and away cheaper than it is today. Just about any G.I./Vet could buy a house with his/her V.A. benefits (3% down), and anyone else could scrimp and save for a few years and then buy a house for 2 or 3 times their annual wage at an interest rate around 6%.

Meanwhile, in TLCIA circa 2011, obscene "compensation packages" are defended as "free enterprise." Well, what did we have in 1973? Unfree enterprise? Amidst all the ideologically convenient defenses of heavily skewed "compensation," we have to admit that the dream of affluence combined with leisure was based on the presumption of society's wealth being distributed somewhat evenly, not by a Communist central state but by the "free enterprise" system and modest common-sense government regulation (limited work hours, minimum wage, etc.) which protected employees from the excessive exploitation of the late 19th century and early 20th century Monopoly Capitalists.

That dream seemed at hand in 1970. Now, after "the limits to growth" were mocked by those expecting ever larger oil fields to provide endless abundant cheap oil, we find that Peak Oil was merely put off a generation; there have been no new discoveries of super-massive oil fields since the early 1970s, and the supposedly abundant alternative petroleum sources like shale oil are horrendously costly to exploit, for they require vast quantities of energy (mostly natural gas at the moment) to be consumed to extract the oil.

Now we face a future which might well be called the End of Work for up to a third of the current workforce. Since agriculture employs about 2% of the workforce, industrial/factory production about 11%, essential transportation and essential government each a bit more, we have to ask: in an economy in which 70% of GDP is consumer spending, how many jobs are actually essential? How much actual wealth is being created/produced in the U.S. and sold overseas? Is giving people with Medicare coverage handfuls of costly and often ineffective medications and endless MRI tests actually creating wealth, or it mostly squandering it?

We might also ask: how much of the consumer economy is superfluous if wage-earners shift values and decide saving is more important than consuming? How many malls, storefronts, internet retailers, restaurants, fast-food joints, etc. can a newly-frugal economy support? How many dog-walkers, derivative salespeople, nail shops, carpenters, financial planners, realtors, etc. does an economy need if the FIRE economy (finance, insurance and real estate) is shrinking?

Based on the tremendous size of the service economy, construction, finance and government, I have estimated that 30 million jobs out of the current 139 million-strong workforce are superfluous. Many government positions are essential: police, meat inspectors, rangers, tax collectors, meter maids, etc., but as Mish so thoroughly illustrated in his detailed analysis of the California state budget ($120 billion or so), dozens of State agencies could be eliminated without any visible effect on the economy except to the wage-earners who lost their jobs.

If 20 million jobs disappear (7 million have already vanished since 2008), so do all the taxes those wage-earners paid; if 5 million homes go through foreclosure, the inflated property taxes the owners once paid will disappear, too. Once businesses close, it's not just wages which disappear: all the junk-fees governments levy disappear, too: the business taxes, the licensing fees, the permits, transaction fees, etc.


Does anyone think all these taxes and levies can fall and government employment will be funded by some other source? Yes, the Federal government can borrow apparently limitless sums at low interest rates; but soon, the surplus money which has piled up in exporters' accounts will be gone, and the endless borrowed trillions will actually start costing real money--money that will be diverted from government employment to pay the interest on all that wonderful debt everyone loved when they got a piece of it.

So how does a society deal with the End of Debt-Driven Consumerism, the End of Cheap Oil and the End of Work when it also means The End of Affluence, even for many of those with jobs? How does government deal with declining tax revenues and rising interest rates?

The death throes of the debt-based consumerist lifestyle are already visible beneath the glossy propaganda of "rising revenues this Christmas season." Those revenues were obtained by selling goods at below cost, in the absurd hope that income-strapped, over-indebted consumers would make profitable "impulse buys." As Mish has documented, the "impulse buys" are being returned even before Christmas to the tune of hundreds of millions of dollars.

The Fed is desperately attempting to re-inflate the debt bubble by lowering interest and mortgage rates and buying up all sorts of semi-toxic/impaired debt. What the Fed dreads is the reality we all feel and see: fear of the future due to diminished wealth and insecure incomes. If your assets have fallen in value, you feel poorer because you are poorer. Borrowing more at any interest rate will not make anyone feel wealthier.

People who fear their income may plummet due to layoffs or their hours being cut are not in the euphoric mood to borrow more, and banks which cannot dare to lose more money loaning to people who will default have cut off credit to millions of previously rabid consumers of debt.

Ask yourself this simple question: how much stuff could people buy if they could only spend surplus cash, after all their expenses and debt servicing payments were paid in full?

And let's not forget that much of what is purchased in this consumerist frenzy is needless, superfluous crap. My wife saves the most egregiously gift-buying-frenzy advertising circulars, and one from Bed, Bath & Beyond caught my eye.

There is no difference between this "1001 Best Gifts" from BB&B and a parody of consumerist excess. Hmm, how about an "executive standing valet" rack of wood and plastic for $99.99?

To make this poor-quality contraption, a forest somewhere in a Third-World kleptocracy was cut down and precious, irreplaceable oil was burned shipping the lumber to China and from that factory to the U.S. across 6,000 miles of Pacific Ocean.

We know this spindly piece of garbage will break in a matter of days, weeks or maybe if the owner is especially careful, months; then the legs will break loose of the base, the towel bar will pull out, etc. and the "we cut down a priceless rain forest to make this" piece of human handiwork will be put on the curb where a diesel-burning garbage truck will haul it to the landfill along with all the spoiled food Americans throw out.

The 16-bottle wine cellar/cooler from China (labeled Cuisinart for your consuming pleasure) for $199.99 might come in handy storing something once it's unplugged--but a cardboard box will probably do just as well.

I for one will not mourn the last debt-consumerist Christmas in America. Good riddance to the flaunting of borrowed money and the heedless, desperate purchase of valueless "goods" as gifts for an insolvent nation awash in too much of everything but common sense, integrity, gratitude, accountability and healthy living.


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Tue, 12/20/2011 - 13:33 | 1997989 GeneMarchbanks
GeneMarchbanks's picture

CHS = Gloom porn.

Tue, 12/20/2011 - 13:39 | 1998012 LouisDega
LouisDega's picture

This is not porn. I cant get a woody

Tue, 12/20/2011 - 14:14 | 1998171 economics1996
economics1996's picture

This guy always fails to omit the size of the federal, state and local governments have grown from 26% of the GDP in the 50s to 45% today.  He kind of hits it with the 30 million useless government hacks sucking up resources but needs to be up front and center with it.

He also fails to point out the increase in transfer payments from 5% of a workers check in the 60s to almost 16% today.

And the role of inflation after 1971 and Nixon's removal from the Bretton Woods agreement.

I mean taking about bull shit debt levels and leaving out the movement to 100% fiat is a little weird.

I understand where the guy is coming from, but ZH should have me write one of these.  I do better.

Tue, 12/20/2011 - 14:32 | 1998266 youLilQuantFuker
youLilQuantFuker's picture

You'll have to join Bloomberg and sneak around to the secret office in the broom closet. Are you OK with that?

Tue, 12/20/2011 - 16:38 | 1998773 economics1996
economics1996's picture

If I had Bloomberg’s data I would write a novel.

Tue, 12/20/2011 - 14:35 | 1998273 Chuck Walla
Chuck Walla's picture

I wonder what "Free Enterprise" he sees these days. The one that bought GM and bailed out banks?  Or the one that is attempting to take over health care?

Tue, 12/20/2011 - 14:35 | 1998276 flattrader
flattrader's picture

CHS is running out of things to write about.

He's recycling (VERY) recent charts he lifts from other websites without links or due credit.

So much for his No Santa Claus Rally call.

Tylers, does he pay you to allow him to post here?

That would at least explain why this nonsense appears on ZH.

Tue, 12/20/2011 - 15:05 | 1998377 perelmanfan
perelmanfan's picture

No, CHS is a good guy. A true synthesist, and those are desperately needed and in short supply. It's possible to quibble with anybody who does the Jared Diamond here's-how-the-whole-world-works thing, and in an article format, he can always be accused of leaving something out. But I find the dude invaluable.

Perhaps the only perspective I would grant him would be to ponder Adam Smith's quote about doom prophecies for America: "There is a lot of ruin in a nation." The countervailing trend of 300-million problem-solving brains humming away - however hobbled by junk-culture assaults - is more potent than many, including lots of ZH folks, are willing to credit. I'd like to see CHS discuss this "damping" force.

Tue, 12/20/2011 - 13:50 | 1998061 Cursive
Cursive's picture


No, it's not "gloom porn," it's a hat tip to the proper functioning of society.  We've created our own financial Tower of Babel.  It's not sustainable.  Best to be prepared for what comes after this stupidity.

Tue, 12/20/2011 - 13:52 | 1998062 Winston Smith 2009
Winston Smith 2009's picture

No, it's the end result of 30 years of destroying ones manufacturing base and compensating through the accumulation of massive amounts of debt to preserve a false prosperity.

The bill is now due and there will only be two results.  If all of the right choices are made at every step by bankers and politicians, there will only be a very deep and very long economic recession.  If everything isn't done perfectly, and it won't be, there will be a catastrophic domino effect economic collapse triggered by any one of many possible triggers.

Tue, 12/20/2011 - 14:20 | 1998195 economics1996
economics1996's picture

To restore the manufacturing base we need;

1.  Flat or fair tax with zero corporate tax.

2.  Energy policy of liaise fair.

3.  One set of environmental regulations for all 50 states.

4.  Tort reform.

5.  A education system that educates (as opposed to indoctrinates).

6.  Stable currency, gold, and silver.

Tue, 12/20/2011 - 16:03 | 1998618 potatomafia
potatomafia's picture

and end copyright laws, and "intellectual monopolies."

Tue, 12/20/2011 - 16:41 | 1998785 MachoMan
MachoMan's picture

Why do you donkeys keep talking about tort reform...  we've had tort reform since the 70s...  what is it you think will be solved by tort reform?  What is the effect you want to create through tort reform?

PS, there are "due process" ceilings to punitive damage awards...  and many states have implemented statutory ceilings to punitive damages...  although, my state declared ours unconstitutional last week.  [I strongly suspect you would change your tune on the concept if you read the basis for our constitutional adoption of a blanket prohibition on any legislation limiting damage awards...  which was adopted from Pennsylvania's same amendment].

Wed, 12/21/2011 - 04:19 | 2000295 StychoKiller
StychoKiller's picture

The best reform would be "Loser-pays," and you know it.

Wed, 12/21/2011 - 10:35 | 2000819 MachoMan
MachoMan's picture

Not at all...  we've made the policy decision that (unlike our father state) we want to hear close cases...  in the pursuit of justice, close calls get a day in court too.  However, for the risk averse, when loser always pays, any close case doesn't have its day in court...

Further, we don't have a pure "loser doesn't pay costs" system anyway...  there are a myriad of generally accepted types of cases (contract for example) in which the loser pays court costs/attorneys fees/etc.

What exactly is your argument?

Tue, 12/20/2011 - 14:27 | 1998239 OneLessZombie
OneLessZombie's picture

It doesn't take a lot of math to figure out that were the massive increases in .gov spending post TARP to be eliminated from GDP we would probably see a BIG NEGATIVE NUMBER which is, don't say the word, DEflationary.

In essence DEflation is being openly MASKED by .gov deficit spending pretty much everywhere.  And we wonder why the private sector is languishing? 

The private sector is on .gov life support.  Don't be expecting them to pull the plug because then they might have to be accountable for the mountain of debt being piled upon our backs currently, with the only beneficiaries being .corp and .mil

At some point we'll realize we're expendable.

Tue, 12/20/2011 - 13:33 | 1997993 Widowmaker
Widowmaker's picture

Shut up and sell -- everything.

Tue, 12/20/2011 - 13:41 | 1998022 silverbullion
silverbullion's picture

... and buy physical gold and silver.

Tue, 12/20/2011 - 14:06 | 1998125 Nothing To See Here
Nothing To See Here's picture

Worst yet, TPTB will do everything to postpone the crash after the GOP nomination process is settled in favor of another clueless, smooth-talking statist. Only after this is done, and when the real crash comes, will the people realize the mistake they made by ignoring Ron Paul and falling for the media propaganda. And on top of the ruins will be a smiling Ben Bernank, in a scene reminiscent of Saddam Hussein in the South Park movie, telling everyone "YOU ARE REALLY FUCKED NOW!".

Tue, 12/20/2011 - 14:30 | 1998254 11b40
11b40's picture

Now you tell me......I should have sold my shorts yesterday!  Oh well.  I'll just wait & sell them later ;-)

Tue, 12/20/2011 - 15:36 | 1998514 pine_marten
pine_marten's picture

You can't get shit for yer shit these days.  Sell my eye............

Tue, 12/20/2011 - 13:38 | 1998007 grunk
grunk's picture

What about that Christmas tradition of shoppers getting trampled on Black Friday?

I'm going to miss that.

Tue, 12/20/2011 - 14:58 | 1998353 Floordawg
Floordawg's picture

You think the Wal-e-World security cameras had entertaining footage before? Wait until the repercussions of this grand fiasco REALLY start to sink into the masses reality... except this time, they wont be paying customers... PARTY TIME!

And as always, "Walmart level" consumers will be the unfortunate first shoved through the economic meat grinder ahead.

Tue, 12/20/2011 - 15:38 | 1998526 pine_marten
pine_marten's picture

Yeah, the security cam shots of the cops looting with the looters in New Orleans after Katrina was really far out.........

Tue, 12/20/2011 - 13:42 | 1998024 Taint Boil
Taint Boil's picture

All is well, we have sausages - life is good

Tue, 12/20/2011 - 14:10 | 1998152 Esso
Esso's picture

Well, that's just weird.

Tue, 12/20/2011 - 14:39 | 1998287 Chuck Walla
Chuck Walla's picture

All is well, we have sausages - life is good


No wonder the evil little mass killer is dead!

Tue, 12/20/2011 - 14:40 | 1998288 Chuck Walla
Chuck Walla's picture

'scuze me, just a  little gas....

Tue, 12/20/2011 - 13:44 | 1998035 Jason T
Jason T's picture

need to update charts.. 

Tue, 12/20/2011 - 13:45 | 1998038 NEOSERF
NEOSERF's picture

Why would we kids want to just use surplus cash when Daddy Ben and Mommy Pelosi spend 2x their means every day, month, year?

Tue, 12/20/2011 - 13:46 | 1998043 Ralph Spoilsport
Ralph Spoilsport's picture

All I've seen is a bunch of pissed off people this Christmas season. People freaking out in parking lots, giving people the finger over parking places. Mothers telling whiny kids "If I buy this piece of crap, will you shut the hell up?" Florid-faced middle agers buying 1/2 gallons of Popov vodka and big bags of pork rinds. Really puts you in the mood.

Tue, 12/20/2011 - 14:12 | 1998160 Esso
Esso's picture

Criminy, I need to get out more. I'm really missing out.

Tue, 12/20/2011 - 14:42 | 1998302 Teamtc321
Teamtc321's picture

No, no your not. I went into wally world a few week's ago to stack more ammo. First time in wally world in over a year, it is no wonder we have such a huge bill coming due. 


Tue, 12/20/2011 - 14:18 | 1998190 LaLiLuLeLo
LaLiLuLeLo's picture

Solution: Don't go to those places. Malls and department stores are for the instant gratification peeps. The real deals are online.

Tue, 12/20/2011 - 13:47 | 1998051 Shizzmoney
Shizzmoney's picture

Even minimum wage ($1.60/hour in the late 60s, I know because my wage stub recorded it) bought far more goods (purchasing power) then than minimum wage does now.

This. So this.

It's funny that Gerald Celente predicted that NYC or other big cities would become like Mexico City in the next 3-5 years.  In the 1970s, as documented by the films, "Summer of Sam" and "The Pope of Greenwich Village", New York City WAS a very much like a 2nd World city, where the divide of well-to-do and shit holes were often only a few blocks seperated from each other.

Now with central planning, gentrification, and the fascist police state....this is covered up a bit and more isolated......but once shit hits the fan, the facade will end, the curtains will lift....and what you will see on TV will NOT be pretty.

Tue, 12/20/2011 - 15:14 | 1998420 11b40
11b40's picture

As someone who lives in the country, works from his home office, and can't see anything but woods in any direction, I pay pretty close attention when I do venture out to the big cities.  Over the past 35 years, I have traveled to NYC from 2 to 6 times a year for business.

Manhattan was getting downright scary in the 80's.  There seemed to be fewer safe neighborhoods every trip, and as I frequently had responsibility for 4 to 6 female sales reps, safety was a big concern.  It reached the point where I would only book roomsw in the Murray Hill district, and the city was grittier and seedier by the month.

Gradually, that changed, and N.Y. began to blossom.  By the end of the 90's, it had been re-born as a great city, and I felt comfortable walking around at night in most of the areas i frequented.

Fast forward to 2009 & and once again I started to feel the decline.  Like so much of the rest of America, there were empty store fronts; entire blocks becoming more stressed, with for sale signs popping up everywhere.  I understand that CRE values have plummetted.

Third we come. 

Tue, 12/20/2011 - 13:48 | 1998054 Mercury
Mercury's picture

Maybe the music will get better.

Tue, 12/20/2011 - 13:50 | 1998060 Ralph Spoilsport
Ralph Spoilsport's picture

"Grandma got run over by a reindeer..." BLAM BLAM BLAM!

Wed, 12/21/2011 - 04:25 | 2000299 StychoKiller
Tue, 12/20/2011 - 13:49 | 1998057 dick cheneys ghost
dick cheneys ghost's picture

How long can The Fed protect the big banks?.........

Tue, 12/20/2011 - 13:51 | 1998064 Cranios
Cranios's picture

Bubbles' endings are notoriously hard to predict, so I'm not sure how he could know that this is the last one.

Tue, 12/20/2011 - 13:55 | 1998072 RSloane
RSloane's picture

Maybe he sees the Big Needle of Fate approaching the bubble.

Tue, 12/20/2011 - 13:55 | 1998075 NEOSERF
NEOSERF's picture

Actually I expect a well known Democratic paleontologist to unearth an astounding set of tablets, probably from the sands of Santa Fe or maybe from a cave in the Rockies...these tablets will without a doubt signify that Jesus was not born just once but 3 times...once on Dec 25th but also in April and August...we will then need to celebrate the holidays THREE times a year, stoking a massive consumer binge that will eliminate most of the debt in this country... 

Tue, 12/20/2011 - 13:55 | 1998076 ebworthen
ebworthen's picture

A critical question not asked enough, thank you.

Where, in a 70% consumption economy, do the productive careers come from to fund the consumption?

It is another suit in our house of cards ponziconomy.

Tue, 12/20/2011 - 13:57 | 1998082 Snakeeyes
Snakeeyes's picture

And then comes the additional bad news.

1 Unit Housing Starts Actually FELL -11.25% in November


Tue, 12/20/2011 - 13:59 | 1998091 Crispy
Crispy's picture

Reversion to the mean is a bitch aint it? 


Tue, 12/20/2011 - 14:01 | 1998103 williambanzai7
williambanzai7's picture


Tue, 12/20/2011 - 14:16 | 1998178 Crispy
Crispy's picture

oh SNAP card....

Tue, 12/20/2011 - 15:49 | 1998571 Nothing To See Here
Nothing To See Here's picture

Awesome work +++

Tue, 12/20/2011 - 14:03 | 1998110 Alcoholic Nativ...
Alcoholic Native American's picture

I just went out and splurged with my EBT card.  Doing my part to help the economy.

Tue, 12/20/2011 - 14:04 | 1998113 Spacemoose
Spacemoose's picture

with respect to productivity, i have two axioms.

1. in the long run (and absent war or theft), the value of the goods and services which country "X" can distribute to its citizens, must be equal to the value of the goods and services which the citizens of country "X" produce (a sentiment which, for unknown reasons, is rarely articulated here except with respect to greece and then only in a roundabout way ["nobody works there"]. is it too obvious to be stated?).

2. in the short run, the value of the goods and services which can be distributed to the citizens of country "X", must be equal to: the value of the goods and services which the citizens of that country produce plus the value of the goods and services the citizens of another country are willing to lend to country "X", less the value of goods and services country "X" transfers to other countries, either as a loan from country "X" or as payment of principal and interest due from country "X" to other countries.

thus, for most of us here in the real world trenches, what really matters is not, per se, bond sales, interest rates or deficits, but rather, the impact those sales, rates and deficits have on productivity and on the allocation of the yields of that productivity.

if you adhere to the above axioms, then even a cursory examination of the numbers would tend to indicate that, if we continue our present path, the US must, at some point in the future, experience (at minimum) an approximate 11% decrease in its standard of living. worse yet, insofar as our GDP includes "goods and services" produced by the government, the actual percentage decline measured against "real" goods and services will be greater, due to the fact that the great majority of "goods and services" produced by the government are the GDP equivalent of empty calories. our situation is certainly not helped by the fact that federal, state and local spending may constitute as much as 40% of GDP. add on top of that, the percentage of GDP which is derived from the FIRE sector is over 20% which (although having some production facilitation and capital formation benefits) is also largely empty calories.

paradoxically, if the above is true, then an increase in the average standard of living of a typical american can go up if GDP goes down. as an example, assume the example of an employee of the dept of energy who is employed for $100,000 per year, writing oil company regulations (which increase the expense of producing energy). in an effort to decrease government regulations, that employee is laid off (this is just hypothetical. we all know that no such thing would ever happen). the ex-gov employee then goes to work for an oil company, for a salary of $50,000 per year. what is the effect on the economy? the standard of living of the ex-gov employee declines by $50,000. the standard of living of the taxpayers who were supporting the ex-gov employee increases by $100,000. the employee increases the productivity of the oil company by an unknown amount Y and the oil company, free from some regulation, increases productivity by X amount, also raising the standard of living of all of us (in the form of cheaper energy for instance). thus, the net increase in the american standard of living has increased by $50,000 plus the value of whatever net increases the additional employee adds to the productivity of the company. the absence of regulations also adds to the productivity of the oil company thus increasing our standard of living. (this would be net of any decrease to our standard of living caused by the absence of the regulations. however, i am assuming, perhaps incorrectly, that the 75,000 pages of rules and regulations in the federal register are a net drag on our average standard of living). thus, GDP down, but standard of living up. (multiply this effect by at least some portion of the over 22 million people who work for federal, state and local governments, and pretty soon we're talking about a real difference in our standard of living).

note that at the beginning of the preceding paragraph, i said "an increase in the average standard of living of a typical american can go up if GDP goes down". i'm not certain that's wholly accurate. it may be that we have gone so far down the road in putting our human assets in non-productive work (like community outreach coordinators for instance), that an increase in the average standard of living of a typical american can go up ONLY IF GDP GOES DOWN.

Wed, 12/21/2011 - 04:29 | 2000306 StychoKiller
StychoKiller's picture

75,000 pages?  Methinks yer a couple zeroes short there!

Tue, 12/20/2011 - 14:05 | 1998120 robertocarlos
robertocarlos's picture

I charged a thousand dollars to my cc and I signed up for NHL hockey on TV. If we're going down then I'm going down spending.

Tue, 12/20/2011 - 14:16 | 1998175 Xanadu_doo
Xanadu_doo's picture

That's the American Spirit!

Tue, 12/20/2011 - 14:17 | 1998182 DogSlime
DogSlime's picture

Sounds like the way to do it - as long as you don't have any assets they can take when they come to collect...

...and as long as they can't convince the government that a kidney/lung/eye can't be taken in lieu of unpaid debt.

Tue, 12/20/2011 - 16:11 | 1998654 Things that go bump
Things that go bump's picture

I can't remember if it was in Buenos Aries or Rio, but they sent techs into the slums to disconnect pirated cable and the guy was sent back without his fingers as a warning.  No one was willing to go in and try that again. 

Tue, 12/20/2011 - 14:07 | 1998135 mirac
mirac's picture

I do not believe in peak oil, but having said that, does anyone know how much it costs to set up a land rig and drill for oil...ballpark.

Tue, 12/20/2011 - 15:09 | 1998396 Sokhmate
Sokhmate's picture

One of the Newton brothers might have an idea. But he relied on robbing banks. Then you need to adjust for inflation. Plus the regulations.

Tue, 12/20/2011 - 15:25 | 1998467 AGuy
AGuy's picture

"I do not believe in peak oil"

Well that's just silly. Do you believe in whiskey Bottle never empties no matter how much Whiskey you pour out?

"does anyone know how much it costs to set up a land rig and drill for oil."


That depends on many factors, such as depth, type of overburden rock, where its located (cost of transporting equipment to the job site), etc . I believe the starting cost is about $500K and goes up into the millions. Sucks when you hit a dry hole or a non-profitable hole. The era of easy Oil money is gone.


Tue, 12/20/2011 - 15:54 | 1998585 Nothing To See Here
Nothing To See Here's picture

Nothing can replace my Talisker single malt, whereas oil can be replaced by some technological advance once the incentives are in for the market to start working on it. That's just a bad comparison.

"The brain cannot foresee its own advance"

- F.A. Hayek

Tue, 12/20/2011 - 17:09 | 1998892 Cast Iron Skillet
Cast Iron Skillet's picture

Hey man, I agree - once you get through the Earth's crust, it's oil all the way down. the only reason the get it easier in Saudi Arabia is that the crust is thinner over there.

Tue, 12/20/2011 - 14:14 | 1998169 DogSlime
DogSlime's picture

I have been astonished by how many people I work with have started a family this year - either that or added an extra child.

Maybe it's my warped way of looking at things, but to me that seems awfully optimistic... a long bet that things will get better?

I would sooner remove my gonads with a razor blade than start a family with things looking like they are.  Optimism these days looks increasingly like delusion or denial or something.

Am I right?  Is this a good time to be having kids?  Am I being overly pessimistic?

Tue, 12/20/2011 - 14:25 | 1998225 Crispy
Crispy's picture

Its never a good time to have kids dude. You either want them or you dont. 

Tue, 12/20/2011 - 14:31 | 1998260 chunga
chunga's picture

It sucks to be so glum but I don't think it is a good time to be having kids. Unless you are part of the 1%.

Thinking about that is even glummier.

Tue, 12/20/2011 - 14:42 | 1998301 n9lhm
n9lhm's picture

No, you hit the nail right on the head. That is also the explanation for the change in the ethnic makeup of this country over the last 30 years. Those that intend to provide for their offspring don't have more kids than they can provide for.

Tue, 12/20/2011 - 14:44 | 1998308 Shell Game
Shell Game's picture

You have the liberty to do as you wish.  For me, kids are the ultimate 'Fuck You' to the system.  The Man has controlled my money, my food, my travel, my armament and my property.  My revenge is to have the children my wife and I have wanted to spite the fear, and to raise them to be independent thinkers, self-reliant and deeply distrusting of government.  If the machine survives us, it will certainly not survive this new generation.

Tue, 12/20/2011 - 15:26 | 1998471 silverbullion
silverbullion's picture


Tue, 12/20/2011 - 14:58 | 1998363 stopthejunk1
stopthejunk1's picture

It is well known that poverty and higher birth rates are correlated.  Explaining WHY that is is probably more complex.


Bottom line, poor people have more kids - in every country, in every age, everywhere.  Shouldn't be any surprise to see it happening here.

Tue, 12/20/2011 - 15:55 | 1998588 Bicycle Repairman
Bicycle Repairman's picture

That's OK with TPTB.  Poor kids are more easily disposed of.  For example, they make more willing soldiers.

Tue, 12/20/2011 - 16:12 | 1998657 STP
STP's picture

Very true and here in California, we make it especially easy for a huge low IQ, low income population to reproduce on the endangered taxpayer dime!


You have a baby on the way! The State of California wants to help you get good health care during your pregnancy, even if money is a little tight (because it’s not our money anyways, it’s somebody else’s money and we don’t mind throwing it around).

The State “AIM” Dept or “Access for Infants and Mothers”


 Services are available to your baby through the Healthy Families Program. The Healthy Families Program covers all medically necessary health, dental and vision services for children and teens (and somebody else pays for this too!  You don’t have to do anything, you don’t even have to work, we’ll pay for it all!)

Then you have First 5, because illegitimate children or unplanned children without the parental resources to raise them are a precious and valuable resource

First 5 California represents an important part of our state’s effort to nurture and protect our most precious resource – our children. Research shows that a child's brain develops most dramatically during the early years of life. Our focus at First 5 California is to educate parents and caregivers about the important role they play in their children’s first years (because, who knows better than us?). First 5 California’s services and support are designed to ensure that more children are born healthy and reach their full potential.


Gawd, I waited until I was 33 years old and a solid career to have kids, what a dumbass I was.

Tue, 12/20/2011 - 15:55 | 1998589 AGuy
AGuy's picture

" Am I being overly pessimistic?"

Nope. The Big Die off is coming. There are too many humans consuming a dwinding supply of resources. Its just a matter of time, years, perhaps decades if we are very lucky. New borns will definately experience the die off.


Tue, 12/20/2011 - 22:13 | 1999741 DanDaley
DanDaley's picture

Ask any anthropologist: big families are generally a sign of bad economic times or conditions -more hands to bring in income, harvest the crops, etc.  Maybe some will survive, goes the logic.

Tue, 12/20/2011 - 14:29 | 1998251 PJPony
PJPony's picture

I have no debt, nor do I intend to gain any.  I've kept my Christmas celebration small.  I am giving food and chocolates for gifts.  Don't like it, don't visit.  I do not expect or want others to spend on me.

It is time to be realistic and not give them what they desire.

Tue, 12/20/2011 - 15:48 | 1998562 youLilQuantFuker
youLilQuantFuker's picture

Diddo but instead I'm only giving away comments from the ZH website.

I find some good ones that can stand on their own, print them out and bake them into X-Mas Fortune Cookies.

'Tyler' Stewart style.

Tue, 12/20/2011 - 18:36 | 1999171 I Got Worms
I Got Worms's picture

I'm giving my dad a shortwave radio and my mom a copy of Chris Martenson's Crash Course. Sadly they are both bonafied sheep and the radio will remain in the box while the Fox News blares in the background, and the book will be placed on the bookshelf between Marley and Me and Eat Pray Love. It will take a Xmas miricle for them to appreciate the gifts for their intended purposes.

Tue, 12/20/2011 - 14:33 | 1998268 tony bonn
tony bonn's picture

amen brother charles amen!!

Tue, 12/20/2011 - 14:44 | 1998307 jimmyjames
jimmyjames's picture

Two other bad things can make this dominance of debt servicing worse: your income can decline, and the value of your assets can decline. In this unfortunate situation, you're ability to service your existing debts is crimped by a loss of disposable income, and you're paying for assets whose worth has fallen below the debt taken on to buy the assets.

Income has declined significantly in the wake of the 2008 crisis/recession:


Sounds a bit deflationary-

Tue, 12/20/2011 - 14:51 | 1998332 Vergeltung
Vergeltung's picture

that was a great read. excellent summary of "dire straights!"


Tue, 12/20/2011 - 14:54 | 1998347 jonerot
jonerot's picture

It's amazing that banks even offer "revolving" credit lines any more.
All credit should be like charge cards; pay in 30 days or else.
Only then would we see the real spending power of the economy!

I never pay attention to the GDP (Gross Distored Profit) numbers.

Tue, 12/20/2011 - 16:16 | 1998674 Elmer Fudd
Elmer Fudd's picture

Big f*n deal, folks should travel more, there's lots of countries that have a huge poor population, and it isn't total anarchy.  Maybe that's why our colleges are flooded with foreign students that work their asses off.

Tue, 12/20/2011 - 17:17 | 1998922 Iwanttoknow
Iwanttoknow's picture


Most of them represent the 1% of their is nearly impossible for a middle class student from thrid or second world,who does not qualify for financial aid to come to our schools.

Tue, 12/20/2011 - 17:21 | 1998941 banksterhater
banksterhater's picture

Squatters not making house payments for now an ave 688 days accounts for $50 Bil/yr in windfall retail spending, and subprime auto loans are back up to 14.5% of sales, and they are even securitizing/packaging them again.

Tue, 12/20/2011 - 20:14 | 1999418 Heyoka Bianco
Heyoka Bianco's picture

CHS, why you talk so much? Need one sentence: Americans hock own asses buy shit break less 3 months. Case fuckin' closed.

Tue, 12/20/2011 - 20:25 | 1999441 Doxastic
Doxastic's picture

It's work like this that makes me love ZH.  Thank you.

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