Posted on 09/01/2009 3:18:57 PM PDT by dennisw
An Empire of Consumption
by Byron W. King
Pittsburgh, Pennsylvania
Just reading the newspapers gives me a daily diet of economic gloom. For example, my pessimism for today (Aug. 26) started with the headline of my local newspaper this morning. The Pittsburgh Tribune Review delivered a banner message, "Record Red Forecast at $1.58 Trillion." (I think they printed the newspaper before the word came out that Sen. Ted Kennedy died.)
Then for a national perspective, I looked at The Wall Street Journal, which published a slightly different alliteration, "Decade of Debt: $9 Trillion." And finally, for an international view, The Financial Times summed it all up in characteristic British understatement, with, "US Says Debt Outlook Worsening." Oh, you don't say.
The big problem - obviously, the headline issue - with the US economy is too much debt. (That's the BIG problem. There's a long list of other problems after that.) And the debt problem is getting worse, not better.
Debt is ubiquitous across US society. Debt permeates the culture. Practically the whole nation has bitten off more than it can chew. Within the past two generations, the US economy has transformed from what Harvard historian Charles Maier calls an "empire of production" (which is what won the Second World War, for example) to an "empire of consumption."
The lunch bucket-toting factory worker, or the beam-walking riveter constructing a skyscraper, symbolized the former empire of production. Those iconic workers are no more. They've been replaced by the image of vast tracts of McHouses blanketing the landscape. Or of parking lots filled with new cars outside coast-to-coast malls, with their owners inside maxing out their credit cards.
It's the difference between an economy that creates surplus capital and an economy that consumes capital to gross deficit. Professor Andrew Bacevich of Boston University summed it up this way in his recent book, The Limits of Power. "The evil genius of the empire of production was Henry Ford. In the empire of consumption, Ford's counterpart was Walt Disney."
Come to think of it, we should be so fortunate as to be indebted just because we collectively took too many trips to Disneyland. As a nation, the US has borrowed and spent far beyond its means. You know what I mean. I don't have to get into the details on that point. In particular, the political class just can't seem to say no.
The other side of that debt coin is a widespread inability to repay. Households are so deep in debt that they've stopped buying, and I don't care what the so-called consumer confidence surveys say. Less buying means that business profits are down. Where businesses are showing profits, a lot of it is because they are goosing the bottom lines through layoffs and spending cuts.
Layoffs? That's putting it mildly. Many of the recent job losses are permanent. They're structural. It's not just the good old days, when the company said, "Go home and we'll call you back in a few months." No, in many cases, the jobs are gone forever.
It's not just factory jobs, either. Those jobs were the first to go. The US economy lost millions of its old-line factory jobs over the past 25 years or so. It brought us into the age of the Rust Belt. Some economists and deep thinkers bragged about how this was somehow "good" for America. (Call me old-fashioned, but I could never quite figure that out.)
Now people with white collars are getting hit with permanent job losses in sectors like banking and law. Many parts of the nation's financial districts are the new Rust Belts of America.
There are former lawyers waiting on tables, stealing jobs from the traditional class of table servers, starving artists. At many silk- stocking firms, even the formerly sacrosanct legal "billable hour" is under attack. And I know doctors and architects who've been laid off.
So joblessness is up, and it's not about to come down anytime soon. With joblessness up, tax collections are down across the board. Unemployment compensation accounts are running out of money. Public assistance accounts are running down. Some states want to give early release to prisoners to save the costs of incarceration.
In Michigan, for example, some counties are no longer repaving the roads. They just grind the asphalt to gravel and save the cost of paving. It's a foretaste of things to come, I believe.
I don't see where the problems of indebtedness have been cured. We're not even close. Maybe it's my inner bankruptcy attorney at work. Where's the wipeout? Where's the discharge? How has all that bad paper out there been voided? It hasn't.
Regards,
Byron W. King
for The Daily Reckoning
>> I don’t see where the problems of indebtedness have been cured. We’re not even close.
Not even close? Hell, we’re not even TRYING.
The current stupid strategy is to shift the debt bubble from the private sector to government. Because (the thinking goes), if we can just keep the damn thing inflated, no one need suffer any pain! God forbid those who mortgaged their futures and their childrens’ and their grandchildrens’ futures should feel pain...
I agree heart and soul. many families will have to move in together just to get by. Party like its 1933 all over again!
Ain’t it grand?
Can’t be a revolution without the pain that causes it and when it comes to pain, you haven’t seen anything yet.
We have borrowed so many times against our future that it's starting to look like stock footage of Western Europe after WWII.
Just as the binge drinker needs time to detoxify, so with the American consumer. Debt must be worked down and paid off before the next binge. This hangover is a doozy (Deucy to be accurate)so the next binge may not happen for a while...
We may not see this kind of rampant consumer spending again in our lifetimes as people recover from the devastation of insolvency.
We will never see a “cure” as long as our government taxes business to the point that it is more profitable to manufacture out of the country.
All too true. Now, all we have to do is find a few dim-bulb-crats who 1) can read, and 2) can pass 5th grade math (the old 5th grade, not new public school 5th grade).
Of course, we should be depressed because there are no dim-bulb-crats filling both of the above criteria.
Obama and the Democrats are juicing things up because they get thrown out of office if the economy stinks
Do you remember when Paul Volcker clamped down under Reagan?
We are getting the exact opposite today
America was different in 1979-1982
It could handle Volcker's bitter medicine
I agree with you
If you want to consume like crazy then do it via your current earnings. If you can do that then fine
But (obviously) we paid for our lavish consumption by borrowing. By borrowing insane amounts. The bubble popped and now we know how indebted we are
I do remember. And American consumers had nowhere near the debt they do now. This time will be much worse.
Rational self-interest hasn't worked out too well. In a Christian culture, the family, not the individual, is the basis of society. A return to family life could be what finally saves this country.
Individuals are paying down debt as fast as they can, and savings are up. Aggregate installment debt has shrunk for the frst time in ages. This is the necessary unwinding of the credit bubble demanded by the laws of economics, but the gubbermint has not the same common sense as the pipple and seeks to escape the necessary pain. It is because of this political contamination that the economy is doomed to worsen for many moons.
Y'know what? I have talked with many people who lived through that era, and their memories are not all bad by any means.
Nobody felt poor because nobody else had any money either. Kids ran around outside and entertained themselves by playing together instead of huddling over some stupid techie innovation.
Stickball was invented so kids without bats or bases could play baseball. They played it in the streets because nobody had cars to drive, or gas to operate them if they did.
Jigsaw puzzles on the table in the parlor while listening to the radio were a great center of family entertainment. Farmers were the lucky ones, who had all they could eat and more, even if they had no cash to pay for 'storebought' goods.
A little whiff of 1933 might actually have a bracing and salutary effect on the flaccid body politic of 21st century America.
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