Wednesday, September 1, 2010

RIP: Consumer Economy (1.28.09)

We WERE a nation of consumers. Now that the consumption process has nearly ground to a halt, and everybody realizes we can simply consume food and the gas needed to get the food (I'm counting work insofar as that is needed), and the housing needed to cook the food and rest the weary, there's enough stored-up consumption to last us quite a while. Given the uncertainties, few among us will go out to shop for anything other than necessities.

We are a nation in search of an economy, I'd say.



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Who is going to invest 25gs in a car when unemployment is just around the corner?
Who is going to put 25gs in their home to up the value in a real estate market like this/
This is true TheraP. But it may have another side.
If things balanced out, there might be an economic surge.
But what exactly will surge?
I can imagine many people either passing along hand-me-downs for babies and children. I can imagine people bartering for services. I can imagine people repairing cars or deciding to live with one car, rather than two, especially if people lose jobs. There's a lot of belt-tightening that can still occur.
What if the consumer economy is never coming back? At least not like we've had it in the past.
Temporary belt-tightening vs. long term structural changes.
It's scary to look at both at once, especially when the pundits (consensus economics opinion) are saying we need to spend like crazy or it will get much worse.
Many are afraid that spending like crazy will be part of what makes things worse down the road, even if it softens the belt-tightening a little now. So far, everything I've seen from the consensus has been inadequately justified. So I'm against such spending until further notice.

(thanks for taking my suggestion to post this topic!)
Had you not suggested it, I wouldn't have done it. So Kudos for the suggestion! And thanks for all your excellent comments here!
You'd better hope the consumption process doesn't grind to a halt. 90 percent of our economy depends on consumption.
If it does grind to a halt, you're looking at anarchy the likes of which would make the violence in those post-nuclear war movies look like a soccer riot.
Be not afraid. That's all I have to say about that.
This is under my post Emerson Said....
If you're interested:
But it was short and rather to the point.
The philosopher and poet Ralph Waldo Emerson gave an interesting talk in the midst of what was called the "Panic of 1837." At the time, nearly half of all banks had failed, credit all but vanished, and the American economy had ground to a halt.
But Emerson did not lament the challenges of the day. He embraced them. He said, and I quote: "If there is any period one would desire to be born in, is it not the age of Revolution; when the old and the new stand side by side and admit of being compared; when the energies of all men are searched by fear and by hope; when the historic glories of the old can be compensated by the rich possibilities of the new era? This time, like all times, is a very good one, if we but know what to do with it."
Bless you for your post. :) Highly rec'd!
More like 70%, domestic consumption, from what I've seen. And it won't grind to a halt either.
What happened to the stock market in Sept. might happen to the economy as a whole. I think that's what the consensus of economists are trying to avoid by propping up spending temporarily.
It's 70 percent, but who's counting.
WAS 70%. That's the problem....
Are you referring to post-TARP $819B bill the House just passed, which will indeed make a surprisingly small shift in the balance between ordinary Consumption plus Net Exports, vs. Government purchases.
The best bang for the buck as far as stimulus goes, is to underwrite private investment and spending. Don't spend $1B of government money directly. Instead, guarantee bonds for that amount, and maybe even offer a slight premium on the interest rate. The premium should be less than the government's cost of borrowing the $1B (or $1T). That is, the Feds guarantee some Municipal and other State bonds. The money comes from the private sector to the States, not the Feds. The Fed cost is the premium, plus the actuarial cost of defaults. So if Munis pull 4% tax free, these new bonds pull say 5% tax free, or even 6% if the markets need that right now. Don't borrow all $500B right away, only as needed.
The States pay off the 4% as normally they would, the Feds pay off the difference. So $1B of bonds costs the Fed $10M per year. It's like CDS for government debts.
Maybe this has been proposed elsewhere?
Yeah, done. That Contact Us form is terrible, btw. And I've never yet had a reply, even though I've posed questions and one option is "comment only, no reply needed" which implies that other options should generate a reply.
Low marks so far for the new White House.
I didn't ask for a contact me. And it swallowed what I thought was more than 500 words. - but who knows?
Try your senators?
500 characters, not words. Maybe I have the wrong form. What's the direct link to the form you use?
You know what... I bet it was words....
Here's the link:
"Message Please limit your entry to 500 characters. 500 characters left"
That's the one I used.
Ok. Glad it worked for you too! :)
congratulations, spric; you're first intelligent post!
Actually it's about 70%
The rich that are still rich are still spending, but I'd guess that when it comes to their own money, even the rich are cutting back here and there.
I'd expect frivolous consumption to be declining among the middle class, but Chryslerberus is claiming that customers are buying SUVs again.
What's interesting is that the high end stores suffered the most during the Christmas season. Sales down 35% and more at some places like Nieman Marcus and other places that cater to the wealthy.
But what do see around you? I see a local restaurant chain that has been a fixture for 40+ years that recently closed. I see a small chain of local bookstores that recently closed. I see empty store fronts in many strip malls. It looks to me also like there's a growing "culture" of frugality on the one hand and willingness to share on the other hand.
But we here at TPM are located all over the country and together we can get a "read" on what's happening. Or might.
Thanks for stopping by, Donal. I can see you bike and you're transporting hay. You're doing your part!
There is also a continued shift to online shopping. Although the growth slowed this year, it is now big enough that it still has an impact.
And there is probably more stuff being sold second-hand on eBay and craigslist than there was in the past via the classifieds. This is mostly "off-the-books" trade not captured in the broad statistics, although the IRS has started to monitor eBay sellers.
craigslist official info from last summer, garage sale ads:
Your point has already been well documented: high end stores used to be recession proof because they didn't pitch to the lower ranks. However, now that they have, they have suffered just like anyone else -- and moreso since their expense means that the poorer people will bail on them before KMart.
Wealthy people are very much spending -- because there are tremendous bargains to be had. Until production slows that is. And when that happens, expect more factory layoffs.
A death spiral.
A shopper leaving Hermès.
For the puzzled few.
“People are feeling guilty and they’re feeling confused and they’re feeling like they didn’t earn their money, especially within the financial community,” says Milton Pedraza, C.E.O. of the Luxury Institute, a market research company for purveyors of luxury goods and services.
I dunno Ellen, my heart bleeds, for... I dunno what.
Sounds like a form of "survivor guilt" to me. People who are doing very well, but can't explain that except by a trick of fate, watching others around them sink into poverty, sometimes also by a trick of fate.
Thanks for that quote, bwak.
Not all tricks of fate!
Some folks were frugal enough in the run-up to this that they'll get through just fine. I know quite a few people who have amassed a not insignificant amount of wealth through sheer frugality, delayed gratification, and thrift throughout their lives.
You're right. I was responding to the comment above about people who felt guilty and hadn't earned the money themselves.
Yes, many of us have scrimped and saved and didn't have all our eggs in one basket. If there's any advice I'd give people, it's pay off your mortgage and keep credit cards paid off.
Yeah, those Cadillac Jeeps are selling like hotcakes, and yacht-building is a recession-proof business, as long as Clinonistas don't impose a luxury tax.
On the bright side, high-end retailers can't seem to keep enough monocle polish stocked to keep up with the demand.
The silver lining may be that we get some ideas as to how to structure a 'static' economy, which doesn't depend upon expanding markets, (whether through opening new geographic markets, or our ever expanding population). I think such a world economy will catch up to us, (assuming we eventually reach homeostasis in our world population). At that juncture, the only way to expand corporate markets will be through innovation, (building better mousetraps), or carving out new demographic subsections of existing markets. Overall the economic growth as such would appear to be static, in that inputs will roughly equal outputs. I don't know much about economics so would be interested to hear others thoughts on this and what it would actually look like.
I like the idea of just moving back into the caves. We could spend our short lives drawing on the walls with sticks.
One word: Japan.
As for static, consider real and imaginary components. What you truly need is real. What you want is discretionary. Beyond that is imaginary.
Discretionary spending is a mixed state of real and imaginary economic activity. Even if the real economy is static (flat standard of living, zero population growth, etc.), the real economy does not fully constrain the imaginary economy. That is, we can live beyond our means for awhile, we can value the stuff of fads or pay fortunes for "art" or antiques, and we can engage in apparenly hare-brained spending such as sending probes to Mars. And we can tithe to religious organizations or give our wealth away in other ways (charity, gambling,...).
One word: Japan.
I thought it was plastics ? Ooops...sorry..wrong bad.

The Graduate did come to mind as I wrote that!
Good blog, Thera. We have a bit of a dilemma here.
On the one hand we have a country that is consuming way more than its share of the world's resources. Even without this current crisis, it makes all kinds of sense that we begin shifting to a different kind of economy, in which something other than consumption fuels the engine (what that would consist of is beyond me, but theoretically it sounds like a good idea to me.)
On the other hand, we have a horrible crisis that may bring down the whole country's economy (which will haul the rest of the world down with us!)and it appears that the only way out is to stimulate consumption. But, I see this as a short term thing. Long term, we're going to have to find a way for people to have jobs that don't require us to buy stuff we don't need in order for them to be employed.
I'm one of those who, at this moment is still okay, and I'm trying to do my part to spend some, rather than just hunker down, which is my first instinct. But then, our pension is through CAL-PERS, and if that goes away we're pretty much screwed, too! With California swirling the drain, that is a possibility...
Supply Demand
production consumption
In basic economic theory you cannot have one without the other. Yes, you can consume without producing, but that's not full economic activity. It's living off your savings (inherited or otherwise), theft, borrowing, or being a leech (mooch, if that's too strong). It does contribute of course. But it cannot be sustained (well, maybe mooching can).
So we cannot move away from consumption all that far. But if we consume less domestically and increase exports (send our excess consumption out of the country), we might be better off. Increased exports means greater external income (assuming prices constant) and decreased consumption means greater savings from all income, so you get double the effect.
How can we increase exports (and similarly decrease imports)? Devalue the dollar. Become more efficient (but that hurts the domestic economy since the waste was part of the activity). Impose tariffs (which can generate guvmint income). Invent new stuff and license it globally.
Anything else?
It's interesting that when it comes to economics, we have the "big economy" of the country, and then we have our "little economies" within each household. And sometimes what's good for one is not necessarily good for the other. I honestly think we're evolving into learning to live with less within our "little household economies" for a variety of reasons. But what our "big economy" will ultimately look like, I simply don't know.
Like stillidealistic, I'll be interested to see how this plays out.
For a while, though, I suspect will people will live off of the consumables they've amassed - to the degree they can. Or share them with others via barter or hand-me-down.
We started getting the hart before the corse back in the Reagan days when the nation bought into the supply side fantasy. It took the invisible hand out of the economy.
In a demand economy, consumers vote by their purchases and competition can actually result in quality goods for a good price made by those same consumers earning enough to purchase the goods they are producing. Consumers are stakeholders in a demand economy.
In a supply side economy, producers don't respond to the demands of consumers. Consumers cease to be stakeholders in the economy and become a finite resource for the producers.
Then the consumers' personal savings are used up faster than wages come in. When productivity rises, the profits are not shared with the workers and the only way producers can sell their products is to convince consumers to hock their futures to keep the economy running. Borrow against your 401k, get a home equity loan spend some more. Don't worry, your house's value will always go up. Then get unsecured credit to feed your family, just to tide you over.
As a finite resource for producers, you are used up, but you can't go bankrupt. A supply side debtors prison is probably in the works.
When the supply side chickens come home to roost, the supplysiders move to their compounds in Paraguay and Dubai.

Whoa, step away from the blog, balilama
I think this country is made up of more than just an oligarchy of rich people controlling everything.
I think we are in for a change.
That Merrill Lynch guy gave up on a 30 mill bonus for last year and will have to repay a mill plus for his behavior.
There will be a new review of corporate activities.
rush may wish that we do not succeed in our new endeavors, much like the House Republicans.
I wish, and hope we succeed. And after one week in office, the new team is showing agility, youth, strength, smarts.....
I am optimistic as well, one of those "you may be a liberal if" things
I think Obama is being "misunderestimated" by many, and at their peril.
I mean, come on, skinny mixed race guy, Hussein, inhaled [that's the point], two year senator, can't bowl worth a damn, didn't wear a flag pin from China, no chance he'll ever win, not as qualified as Sarah Palin,
And now he's POTUS!
I too am placing great hope in Obama. And taking solace in other hope-filled people here. You did a great job of describing his improbable rise. He's used to fighting the odds. We're lucky in that.
Once again:
Economic growth requires cheap energy to hide the costs of the growth. Cheap energy is about to end.
Growth also requires additional consumption: either by gorging more, or by growing the population.
Static, steady state, however is bad as well. It means you won't have resources to risk for improvement (which also is a form a "growth").
There will be a real reckoning. And the majority who say things like "it will be interesting to see what happens" will find out that without vigilant planning on how to land the plane, the plane will crash. Most currently resist the solutions because they mean and end to daily life as we know it.
Clearthinker, you tend to shoot down everyone else's ideas, but I'm not clear what specifically you think we should be doing - whether we resist it or not. Seriously, I'm interested. I tend to find your comments overly negative, but I might change my mind on that if I better understood your thinking.
For example, you say the era of cheap energy is over. That sounds awfully plausible. But what do you think is replacing it? The era of somewhat more expensive engergy? Really expensive energy? Impossibily expensive energy? Each alternative suggests different courses of action.
When cheap energy goes, nothing is 'replacing' it.
What were our sources of 'cheap' energy in the 18th Century? Humans (slaves, peasants, what have you), beasts of burden, moving water, and wind.
Think about manufacturing from these sources of energy. You can't do it. Therefore, heavy manufacturing won't happen.
It's not like we are going to wake up one day in the 18th century. But we will start sliding backwards and it's tougher to mine ores, roll steel, produce machines, electricity, etc.
Agri-business (e.g. farming) will dramatically change and yields will go down.
You can't fight the laws of physics.
I suggest you read OVERSHOOT by William Catton.
We are the bacteria in the finite petri dish. Once we use up the media, our colony dies.

I knew you looked down on all us mere mortals CT, but "bacteria"?? That's harsh man!
CT, I am consistently amazed at the certitude of your predictions, particularly since they invariably involve some variation on mankind's descent into a state of barbarism. For this, I nominate you for the TPM Hobbes Award. Unfortunately, I won't be able to deliver the award after the inevitable apocaplypse you are sure is coming.
Hi TheraP. Once again you have grabbed the tail of the tiger which is the best way I know to show everyone that there really is a tiger out there. And this one is a very big tiger. I don’t think “RIP” is too dramatic a phrase to attach to the state of our “post industrial” economic ways of fond memory. Like many other seemingly immortal institutions like the rule of law (Habeas Corpus), human rights (torture) and the integrity of the democratic process (election tampering), our very economic way of life has gone the way of all flesh. I consider the current circumstance to be the Great Depression Redux. We have brought back the conditions before FDR and this time there will be no New Deal. Here is my thinking.
I believe that it is generally agreed that the Great Depression did not end until the advent of WW II. The thing for us ordinary folk to remember is that there are two parts to this fact that are relevant to ourselves and our lives. The first part is that WW II removed a large number of people ( primarily males ) from the work force while at the same time creating an irresistible demand for goods, that is, war material. Millions of people were put to work manufacturing these goods which happily for the economy were quickly destroyed creating the need for more of them. In short, people were put back to work. The second part is that there were no consumer goods to be purchased with any of the disposable income that was finding its way into the hands of the general population. Everything including food was rationed. If one had money there was nothing to buy – no baby strollers, no toys, etc. etc. Extra money was funneled into savings (“war bonds”), giving a certain patriotic lilt to the idea of NOT consuming. After four years the war ended and the happy confluence of pent up consumer desire and available savings resulted in the economic boom and optimism of the 1950’s and early 1960’s.
This time around there will be no great national purpose to justify a nationalized economy managed at every level by the central government. And so people will not be put to work, will not be called to suspend individual wants in favor of some noble endeavor, and will not be building a watershed for future material comfort. This time it will not be some interregnum of austerity that sets the stage for a bourgeois resurgence. This will be a raw battle between groups of ordinary folk and the great powers of wealth. The stage is set.
We are indeed, as you say, a nation in search of an economy but more than that I think, with the destruction of the last thirty years, we are also a nation in search of an identity.

Mr. Hinds, thank you for that long and educational comment. And I completely agree with your final statement:
we are also a nation in search of an identity.
Yes, and that statement makes me wonder if the answers to the identity question will be the ones that resolve the economy question. You mention the lack, this time, of a "great national purpose." But if our will as a people can be harnessed in the service of such a purpose, we might turn ourselves around. I think that is what some of us are trying to do - to return to the Rule of Law, civil rights, and the democratic process (voting as you say). As you suggest, it may be too late. I hope not. But I am realistic enough to see that bush may have fiddled as our nation began to decline.
In addition to your educational comment, I read this even longer analysis today on another thread, which you and others may find interesting:
It's very long but fascinating, somewhat tangential to this blog - but I highly recommend the comment (as well as the string of comments back and forth that followed this one, particularly his discussion of community).

(For the record I am neither optimistic nor pessimistic about the future. History continues on each day. Something with happen today that influences what happens tomorrow. Future historians will look back on these times and if they see a major shift in the dynamics of civilization or culture they will give it a name and then argue about it. It is my suggestion that we are upon a moment of such a shift in the U.S., which is why I liked your succinct and salient post. You grabbed something by the tail alright. I am suggesting that there is something much larger and more imposing that is attached to that big black and orange thing that you found swishing away in the underbrush.)
Let me be so arrogant as to play that future historian for a moment. Very soon we will have to debate the merits of Habeas Corpus which is interesting to me because it is kind of like debating the axioms of Euclid’s Geometry. It is interesting because without the axioms there is no Euclid’s Geometry. So in fact the debate will be about whether or not we want Geometry, which is to say whether or not we want citizens to have rights. And we will soon debate the subject of “torture.” This debate will mark the end of the era of the “world wars” where the lessons of those conflicts insisted upon us all a certain set of basic human rights. Whatever the outcome of that debate, the content of it will include only wane references to Dachau or Dresden. We may be calling them the Jack Bauer debates. As regards the degraded state of our elections, I almost don’t know what to say.
One does not debate those things about which one is certain and so I find these controversies suggest that some important old verities are no more and that a new set is upon us. This new set is as yet unknown which brings me to the subject of the economy. The current discourse on economics reminds me of nothing so much as the Scholasticism of medieval philosophy. It is reason in the service of dogma. Capitalism is independent of the state except that it will collapse without the state. This is not unlike the old free will v. determinism argument where the corporation is the person and the society is god. God wills that the corporation be free and creates the world in which it is free. We, the ordinary folk, are the Creator and we have chosen to give our creatures their freedom. Or something like that. This is not your father’s capitalism v. socialism debate. This is high theological speculation. I sense a need for a new council of Nicea and a new creed.
I happen to be rereading Francis Lappe’s updated “Diet For A Small Planet” in which she chronicles how her interest in world hunger led her to the subject of food which led her to the subject of economics but which ultimately led her to the subject of political philosophy. I think that in a similar way your evocation of the death of the consumer economy leads us to a consideration of macro economics which leads us ultimately to fundamental political issues. You say of the “great national purpose” that ”if our will as a people can be harnessed in the service of such a purpose, we might turn ourselves around.” I agree except that we cannot turn around, we will have to go forward and face what is at the other end of that tail.

Wow! I hardly know what to say. There is so much meat here. I feel like you could lead a seminar. We need such a seminar.
I love your image of Euclidean geometry. The way everything is built on assumptions. And now the ground is shifting/has shifted. Yes, perhaps due to my training as a therapist, I tend to look for the underlying assumptions. And we are at a point where we can see the "old" (Founding Fathers) assumptions, and the "neo-con" assumptions (might makes right is one, I'd say), and the ongoing medieval debates (I like that analogy too! "reason in the service of dogma"), and then..... something new which could come to birth, which could arise.
Here's a digression. We watched this great series on India on public tv last week and the week before. India has such an interesting history. But there's that Eastern view of things, which pervades the society. When you say, you are neither optimistic nor pessimistic, I thought: Zen, as in, "things are as they are and cannot be otherwise." (Taoist, Hindu... whatever)
But, if something that happens today affects tomorrow and so on, then don't you think our inner "poise" vs "drivenness" is a factor too? Obama has poise. bushco was driven. My take.
So what I'm saying is that it might be possible for us to cultivate an inner peace or "poise" that sees the landscape of our time and can live the new assumptions - whatever they might be. I think the assumptions have no meaning unless they're lived.
Maybe I'm straying too far afield. In order to "see," you must face what is. I think we'd agree on that. You must face how terrible things are. Not to moan and groan. But to really "see." That's the tiger, as you say. I feel like you're hinting at things that you "know." Maybe you're saying the society must face what American exceptionalism has done. We must face it. Terrible as it is. Fearful as some may be of our doing that. I honestly agree. I think in life if you are unwilling to peer into the abyss - the existential abyss - you are kidding yourself and you've swept stuff under the rug... which will come back to haunt you.
Am I going in the right direction?
Something is pulling me along here. Something is determining the issues I'm circling. And I agree that what we're dealing with always seems to come back to fundamental assumptions, a political philosophical dilemma for our time. I guess I see a spiritual component here, a moral one, and a need to get beyond dogma - absolutely! (our system is not "the best" or "the only" - but that's a hugely scary thought for most Americans)
Any little bones you can throw me are most helpful! I so appreciate your efforts here.
Since you mention the abyss I am reminded of how Nietzsche described Zarathustra walking in the full light of day carrying a lantern because people did not seem to see what was obvious, namely:
“God is dead. God remains dead. And we have killed him. How shall we comfort ourselves, the murderers of all murderers? What was holiest and mightiest of all that the world has yet known has bled to death under our knives: who will wipe this blood off us? What water is there for us to clean ourselves? What festivals of atonement, what sacred games shall we have to invent? Is not the greatness of this deed too great for us? Must we ourselves not become gods simply to appear worthy of it?”
I have of late been fond of following that old saying “Only Nixon could go to China” with “and only Wall Street could destroy Capitalism.” Paul Krugman is no Nietzsche but he has been clear that re-animating the major banks is not possible. He might have paraphrased the quotation above in an article titled “Also Spracht Alan Greenspan” and made it clear that Capitalism is dead and we have killed it. And no matter how many bundles of Federal Bank Notes we burn on some altar the deed is done and cannot be undone. Or am I hysterical and completely wrong. Can you find me a bank president or corporate CEO who will publicly declare his Faith is strong and will promise to never ask to be bailed out by, ah yes, by us. Or “Must we ourselves not become gods simply to appear worthy of it?” It is a heady business to take full responsibility for one’s choices but without our economic god sitting in heaven, it is what we must do. We must stare into the abyss.
As for the Zen of my attitude, I am not ambivalent. I do hold the wisdom of the East in high esteem but I try to be careful, being a creature of Western civilization, that I do not assume anything more on my part than an appreciation of its complexities. Really I am unable to be either optimistic or pessimistic after what giants I have seen fall in these recent times. I would never have believed that Habeas Corpus would have gone away or that torture would be embraced as necessary. But what really stuns me is that all of this occurred without some great hubbub. They fell like great trees that die long before they fall over. I just didn’t see it coming and so I am chastened in all of my thoughts these days.
Finaly you raised the matter of Obama and poise. This is pure speculation on my part but I think it has some merit. Barack Obama is a multicultural person who grew up as a black man in America. Nothing he will ever hear or see in the Oval office will change that. As a multicultural person he must see differences among persons and groups as normal and not as problematic. To destroy the difference is to destroy the person or the group. He is likely not bi-partisan nor non-partisan but rather a-partisan. If he wishes to show respect and concern for everyone he is likely to pursue cooperation above all else. As a black man in America he has surely learned that confrontation is seldom a path to the advancement of one’s interest and so his instinct will be to use common interests to leverage support rather than political muscle. And he has worked as a community organizer. I’ve done a bit of that and one quickly learns that while you will never win the game you can score some points. In that best of all possible worlds, any success is a real victory, all else is idle daydreaming. My guess is this above all else is the source of his poise.
Now all of this may be too much for our political culture. Obama is not Nelson Mandela nor Mother Theresa. He did not earn his wisdom from a lifetime of suffering and sacrifice. He is more like a prodigy than a genius. Others will see him as vulnerable. But I watched a very young woman play jazz bass with some legends of that art. She was simple too young to have “learned” how to play the way she did but the fact was she did play it right. She is a prodigy with a lifetime of contributions to music ahead of her. I see Obama as much the same with a tenure as President ahead of him with much to contribute in the realm of politics. The failures will not be his, they will be ours. He will likely play it right but will we hear it above the lamentations for our dead past.

I noted the irony, at Davos, that the financiers had to tout the virtues of Capitalism! That shows how far down they've brought us all.
I have thought a great deal about your comments. (And I assure you I will keep thinking about them.) Indeed, my newest post is, in part, a look at the tiger. Or perhaps I've just pulled another tail? I agree with you that I never thought we'd see the demise of Habeas Corpus or the ends justifying any means (used to gut our principles and values). And I simply can't abide a country that would allow torture or forget Habeas Corpus - all for the chimera of "safety."
In the end I think we must learn to view ourselves not as Americans first but as humans first - so that we never deprive others of rights we arrogate to ourselves. Rights must be for ALL - or they are for none.

I so agree with your assessment of the effect of WWII and I myself have tried to educate people of this as well. How soon we forget our history. Also too WWII was also a great distraction from the depression as well.
But as you point out, we will have no such diversion or economic sink for our goods this time.
A growth economy with out faux bubbles requires almost constant innovation of some sort. And I, for one, do not see any in the near future.
It's not easy. But there are fields that can drive innovation and organically stimulate the economy. I'm thinking energy, biotechnology, health care technology and mass transit.
Yes, this is a very general statement. But the fields are specific. The catch, though, is that to be effective, we'll need to work with the rest of the world.
It would seem we have two options: (1) World War III, or (2) Revolution of the Proletariat. Otherwise, we are doomed.
When we find it, it's going to look a lot different than what we've grown used to. We need to strike a of sustainable balance.
It strikes me as odd that a major focus of bank stimulus is to jump-start lending. That makes sense for business.
But consumer debt is 130 percent of income. Home equity is gone. Credit cards are maxed out. Every dollar in the stimulus package that doesn't create jobs (that means every tax-cut dollar) will be used to pay down debt. Now and for years to come.
I think the old days of mindless consumerism and limitless growth are gone. A new economic calculus will emerge. I think a big focus will be on sustainable living.
But to get there we need jobs. Good paying jobs that will stabilize middle class wages and get them growing again. Jobs that can't be exported.
Do you ever wonder where money comes from? Lending is essential. For every $1,000 a benajk lends, $100,000 is added to the money supply. Without it, we die.
Our entire economy is based on fiat currency, the fractional reserve system, and a continual exponential growth in the money supply. debt=money. Our economy (and now the world economy) is one great big giant ponzi scheme.
Then we need a lot more jobs and higher wages, 'cause we've reached the bottom of the pyramid.
I think all of this "End of the Economy as We Know It" stuff is way overdone, and is approaching mass hysteria. Some of it even reminds me of the fanaticism and apocalypticism of medieval flagellants, who felt they had to whip themselves bloody for the hideous sins they imagined were behind their own social calamities.
If your income and your credit load are out of whack, then by all means re-adjust them. You made some mistakes, like a bunch of other people. It happens to us frequently; we're human. Correct the mistakes, but don't start punishing yourself. Don't start lighting candles, wearing sackcloth and lying prone on the floor like a penitent monk until the evil worm of inordinate consumption is purged from your bloodstream.
My snowblower revealed it is on its last legs today. You know what? I'm going to buy a new snowblower. And I don't think the god of Virtuous Savings is going to turn me into a pillar of salt for it. Life goes on.
And I'm getting tired of the slander that Americans "don't produce anything". Most of the Americans I know work their asses off. I work in the book industry, and I'm fairly certain America produces way more books than any other country. I know many of the outstanding and hard-working editors, authors, printers, marketers and warehouse workers who have been making the books and getting them to people who want to buy them. And books are good. The vast majority of Americans have jobs they can be proud of, producing useful things for themselves and for others abroad.
Yes, America hasn't been producing quite enough, and its been buying a bit too much. We've borrowed too much, and we've been letting the financial component of the production chain take too large of a cut. We need to reform and modify our ways in a prudent manner. But we don't need to start shaking and quaking, bewailing our sinful pasts and denying ourselves nice things because we think we are not worthy.
Let's be a lttle gentle with ourselves, OK? Enough with the self-fulfilling misanthropic misery.
HEY! You left out the book designers and graphic artists.
(feathers ruffled)
I have friends in book design. (sniff)
(Their work is going to India)
I know!
Dan K, we have disagreed about the Middle East, but I'm with you 100% here.
But just in case, I'm putting a down payment on a little cabin in the Idaho mountains that I will stock with plenty of condoms, canned goods and assault weapons. There, I will wait out the economic downturn, reemerging only when Clearthinker gives me the ok. It could be a long wait.
This an excellent post, Dan. You mention two things, one directly and one indirectly, that I believe are at the core of a solution.
First are books. They are a manufactured product unique in the fact that they keep producing, at no additional cost, long after leaving the manufacturer. Books are the ultimate economic stimulus package for within them lay the foundation of job creation, wealth building, and economic expansion required to catalyze the imagination necessary for prosperity. Books are the ultimate infrastructure of our nation and humanity.
Second, though indirectly so, is what our monetary system is based upon. At one time it was gold though, now it is debt (fiat). It is the debt foundation underlying what a dollar is made of, and redeemable for, that has become the problem. In our system we can not produce enough money to keep up with the exponentially increasing amount of interest owed. The system has to crash at some point. (Evidence: Owning debt is quickly becoming a worse and worse investment.) Whether that time is now or somewhere in the future is debatable but, since interest owed will always grow faster than money is supplied, a tipping point will be reached. Therefor, money (legal tender) is going to have to be based on something else. I don't know what that something else will be but I think the answer lies somewhere within technological capabilities, innovation, education and creativity which brings me right back to books/education/science/knowledge and learning.
Nothing wrong with Fiat Money.
Your link didn't work for me, PCA. Or was that the point?
Try this one then, but it's only a joke.
Books blow. Give me e-books and PDFs.

Many of the jobs you name are being obsoleted by the electronic age. To actually produce a book is more and more about getting it online.
The newspaper industry is dieing... books are a cousin to this.
Moreover, who is reading those books?
As physical books become more expensive (paper, etc.), you will see sales drop and libraries (loaned books, what a concept!) will come back.
The world will little note the sudden end of computer books, self-help books, and the pulp fiction that crowds the shelves in your local brick and mortar store.

At that point, Dan K can apply for a position as a vassal, a step down, to be sure, but he will be happy to merely receive the sustenance so many others will have to do without.
It's nonsense.
Books are superior to electronic whatnots in at least rather important respect. They do not require batteries.
There will always be books.
The smart consumer will buy a fishin' pole, just in case there's a REAL collapse...
A fishin' pole, and a lake to fish in . . .

I had that exact same thought, JNag. The pole does not good without the lake. (and an environment which allows the fish to live in it)
If you want to think about fishing, I suggest you note the recent drop in salmon population.
All these quaint notions miss the fundamental point: in "simpler times" there were far fewer people on the planet. Therefore the earth could support those people.
The vast number of people on this planet is made possible by technology which is made possible by the economic growth we've experienced.
When economic growth collapses, so does the technology, and the population will contract. How violently a contraction is up to us. Judging from many of the responses I've received at TPM, most will do the equivalent of simply letting go of the steering wheel in panic.

Bacteria aren't known for their evasive driving skills.
Now that is a great line! Kudos!
No...they are not, but they do enjoy phagocytosis from time to time.
I figured I'd up the ante -- put on a tie, pretend to be a failed banker, get a piece of the bailout, and give myself a bonus which will include a few other essentials, such as gold-plated yacht.

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