The Devolution of the Consumer Economy
by Charles Hugh Smith
by Charles Hugh Smith: Why
the World Is Financially Doomed in Four Charts
transformed into consumer economy that is exquisitely sensitive
to debt and the costs of servicing credit. In other words: the bill
is finally due, Baby.
One of the
foundations of modern economics is the belief that insatiable demand
for more goods and services is a permanent feature of humanity.
This is also the basis of that other foundation of modern economics,
the extension of credit so consumers can buy more now than their
savings would otherwise allow.
It was a
match made in Heaven insatiable demand and nearly unlimited credit.
Want a shiny new car, but have saved no cash? Not a problem. It
will only take a modest monthly payment for 5 years (or longer)
to indulge your impulse to have a shiny new vehicle to reflect your
individual glory and unique personality (never mind the vehicle
is mass-produced; it was "customized" just for you).
of mass-marketed credit was one of the great innovations of capitalism.
In the Depression, my grandfather paid $1 a week toward my Mom's
first bicycle. The town's shopkeeper extended the credit, took the
risk of non-payment and earned the interest.
Credit in modest
amounts has positive features; with cash in short supply, the storekeeper
probably had to extend credit just to book enough orders to keep
the doors open.
On the consumer
side, if servicing credit costs $1 out of a weekly paycheck of $25,
then it's a modest tradeoff with substantial benefits.
In the late
1960s, a new innovation appeared: credit cards, a magical rectangle
of thin plastic which enabled consumers to buy virtually anything
they desired right on the spot. "Impulse buy" became a
reality for anyone who qualified for the magic card.
of course a "marginal return" aspect to consumption. The
first piece of chocolate cake is heavenly, the second is rewarding,
and the third, hmm, no so amazing. Each succeeding piece carries
a higher cost and a lower reward/return.
consumer ennui born. After a steady diet of continuous buying
and consumption, the consumer finds less and less satisfaction from
the ownership; soon, only the act of acquisition/purchase creates
the "high" of satiation and excitement.
hit of self-renewal and self-expression via consumption is also
prone to habituation. The satisfaction of buying something new only
lasts a brief time, a period that becomes shorter as the purchases
pile up. Like the rat on the wheel in the cage, it becomes increasingly
difficult to buy enough to keep the high going.
also some practical limitations, such as where to put all the crap
you've bought. Luckily, ever-resourceful capitalism has the
answer: self-storage units, which act as "cheap" extensions
to store your valuables.
the rest of the article
© 2011 OfTwoMinds.com