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Thursday, September 10, 2009

Economy The Twilight of Consumer Society

Posted by Charles Mudede on Thu, Sep 10, 2009 at 8:25 AM

The state of things simply stated: "Banks aren't extending credit and consumers don't want it anyway."

Another article declares consumerism in its neoliberal form will never return:

(McClatchy)One year after the near collapse of the global financial system, this much is clear: The financial world as we knew it is over, and something new is rising from its ashes. Historians will look to September 2008 as a watershed for the U.S. economy.

There was even an article (I lost it in the course of my surfing) that expressed moral indignation at the fact that consumers were not putting their full weight behind the slow wheels of the "recovery." Be that the case, it is clear to almost all economist and business analysts that the composition of the American economy, and therefore the composition of the global economy, is undergoing historic changes.

(NYT) Total consumer credit is declining at the fastest rate since World War II. Revolving credit is falling at the fastest rate since counting began in 1968.

Given how overextended many people were, this should be viewed as good news, at least over the long run.

To use the words of Cybotron: "Tomorrow is a brighter day."

Comments (10) RSS

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Consumer spending is down for those who couldn't afford it. Upper middle class professionals, like myself, can still enjoy ourselves. Want to see my new iPhone 3Gs? It rocks!

Posted by Great White North Rocks on September 10, 2009 at 8:29 AM

Or the market outmaneuvered consumers. It probably explains, for example, why hot new electronics are no longer $2,000 but closer to $200. You don't need credit to buy a $200 iPod, and most people only need one flat panel TV so they just save up for it or buy it in one go.

And with the new iPod lines, upgraded iPhones and a myriad of other products out there for under $500, I think we'll see Apple and other companies leading a market-driven stimulus in the form of affordable but high class products.

Posted by Baconcat on September 10, 2009 at 8:30 AM

Even if you strip out all the things the government puts into the consumer spending number that do not belong such as non-profit spending and healthcare, you still only get a decline of around 3%(with them personal spending is actually up). While the largest drop in 50 years, it is not exactly indicative of the end of a consumer society. A slightly less consumer society sure. We may very well have a long term shift in terms of how people view debt and saving, but we can both consume and not go into debt. Consumer debt certainly helped in the growth of consumer industries, and its loss is a big reason why we are having a recession, but going forward it is not hard to envision a scenario where we have much lower debt levels, much higher savings, and still growth in the consumer sector. It will just be slower.

Posted by giffy on September 10, 2009 at 8:42 AM

@2 You're exactly right. Innovation springs from a lack of infinite to play with. If companies still want to sell as many items as they did before they will have to make products that do more, with less, for much less.

Posted by Joh on September 10, 2009 at 8:43 AM

Reminds me of that SNL skit with Steve Martin for the Consumer Debt Pamphlet: Stop Buying Stuff You Don't Need.

Posted by The Amazing Jim

on September 10, 2009 at 9:01 AM

Consumer spending was tied to an excess in home values. If you saw your home value climb 20% you could borrow a lot of money against that equity. But that increase in home values was being driven by false assumptions. One was people who couldn't afford the home they were in had been getting wealthier because that home had increased in value. In fact, the mortgage had been sold as a low risk, high value commodity. Neither was true. And when their mortgage payments increased dramatically they couldn't pay them and were foreclosed. Their home was worth less than they owed and they had borrowed against that false equity on top of it. Where will the increase in net worth come from now? If your income is going down in value and so is your home, what is there to borrow against so you can shop?

Posted by Vince on September 10, 2009 at 9:26 AM