Without Cheap Credit, Consumer Economy Will Disappear by 2020

Reddit

Our old pen-pal Jack Lessinger has a new book out: CHANGE

Jack is a rare economist. He studies social trends and connects them to economic trends…and, finally, figures out how they affect the property market.

His book outlines the development of the US property market over the past two centuries in terms of what he calls, “paradigmatic economic changes”. He notes that the shrewd investor always had to stay ahead of the trend. That meant, looking beyond what the then-current paradigm had raised up to what people were likely to want in the future.

Instead of investing in the old colonial regions along the East Coast, for example, an investor in the early 19th century should have looked to the frontier. There, he would have found cheap land…and could have watched it soar for the next 50 years. He should have seen the huge development that would take place in Chicago and St. Louis, for example.

Later, after WWI, the landscape changed dramatically. New technology had created a new idea about how people should live – in the suburbs. For the next 50 years, fortunes could have been made simply by anticipating the growth of the suburbs – further and further out from the urban centres.

Our consumer economy did not exist before 1900, says Lessinger. Since then, it has grown and grown – “Sexy young women, smiling from the billboards, urging strait-laced and penny-pinching citizens to save less and spend more. Buy, buy, buy screamed the advertisers. Buy Coca Cola and be happy. Buy Dentine gum and be kissable. Buy Camels and be manly. The consumer economy blossomed. Houses grew bigger and more lavish, cars roomier, faster and more comfortable. What a great time to be alive!”

But buy, buy, buy is going bye-bye, says Jack. The consumer economy is unsustainable. People don’t have the money for it. It is based on cheap energy and cheap credit, both of which are running out. He thinks it will disappear by 2020.

“Get ready for an existential leap…” he warns.

The next Big Thing in American society will be a huge interest in downscaling, downshifting, and simplifying. When the baby boomers realise that their houses won’t allow them to Live Large, says another friend, they’ll begin to appreciate Living Small.

Jack comes at the subject from a different direction than we would, but his book made us think.

Bill Bonner
The Daily Reckoning Australia

Bill Bonner

Bill Bonner

Best-selling investment author Bill Bonner is the founder and president of Agora Publishing, one of the world's most successful consumer newsletter companies. Owner of both Fleet Street Publications and MoneyWeek magazine in the UK, he is also author of the free daily e-mail The Daily Reckoning.
Reddit

Comments

  1. The end of the consumer society is an ecological necessity. A globe with finite resources cannot support endless material acquisition.

    This will also lead to a new political economy. Capitalism as we know it cannot exist without the consumer society. Capitalism requires constant growth for stabiity and economic growth requires an increase in demand. It might be the case that within a generation the current global capitalist system will fall just as swiftly as Soviet central planning.

    Reply
  2. Interest Rates will have little long term help. NAFTA is taking root, and the seat belt light just came on… ready for the “soft” landing?

    Reply
  3. It’s not a capitalism we have today around the world and it sure will collapse. It’s the big governments welfare states.
    The true capitalist and really free markets are not the man made and ruled thing. They are the nature’s laws.
    I truly believe that it’s the only way for humanity to prosper in any time.

    Reply
  4. Capitalism as we knew it is long gone and finished.With the SOCIALISM style bailouts for the large financial institutions,the idea of true capitalism has been abrogated.With the collapse of the USSR we have been given little extra time to get OUR house in order,which our leaders have failed to do.As such, there is now much more capitalism in RUSSIA or the ex satellite states of Central and Eastern Europe than there is in the USA.We will fail as a nation with our defunct green little papers that we call dollars.At 5 cents on the dollar remaining in value from 1913,it is utmost shame to destroy the once greatest nation on the surface of Earth.Incidentaly,small country of Slovakia has GDP growth of 8.9% per annum and the Slovak Crown has gained against the USD about 55% in the last 4 years.They went from socialism to Capitalism,whereas the USA is going from Capitalism to ????
    ABYSS.

    Reply
  5. What a lot of rubbish. The term socialism is used inappropriately for a start. If you understand the concept of ‘power elites’ then it is one ‘elite’ group bailing out another group. All of the power elites have a vested interest in maintaining the status quo. Another interesting point to make is that even at its peak the Soviet Union was not the largest planned economy in the world. That honour went to the industrial military complex of the US – this is still true today.

    Typical myopic view of the world – the US is imploding through its own self inflicted policies that are highly contradictory. A bit like burning the candle at both ends and in the middle. From a finite resource bucket the US is launching ‘colonial’ wars, expanding its military reach, reducing tax liabilities and having to find resources to maintain the fabric of society. The solution appears to be to ramp up the printing presses and hope nobody notices all those depreciating dollars flooding the world economy. However, central banks and and investors around the world are noticing. The only lever the US will have is its military and a declining means of supporting that as time goes on.

    Reply
  6. The deregulation, privatization, and globalization of business in recent decades was based on an ideological premise–free markets bring the greatest good–but this will prove an illusion. From a long tradition of using military solutions, the United States has seriously compromised itself–preventive wars, lower taxes, expanded military–all sustained at home by a consumer economy that is inherently and collatorally unstable. The increase in energy price will scotch the trips to the mall, and soon it will be the focus of doing anything to ruin communities and families to sell its products. Americans are going to need to get ready for a paradign shift–the massive waste of consumer culture, the pitiful premises of our foreign policy, and our massive debt will cause an enormous, fundamental, unstoppable transformation in our society. We will be poorer. Remote suburbs will bust. We will implace programs to prevent us from descending into social chaos. We will use the libraries, stress a more outstanding value and science curriculum, and buy products for their usefulness and make lots of clothes at home. Perhaps we will be happy, but the fundamental churches will be mad as al.

    Corinne E. Blackmer
    July 28, 2008
    Reply

Leave a Reply

Letters will be edited for clarity, punctuation, spelling and length. Abusive or off-topic comments will not be posted. We will not post all comments.
If you would prefer to email the editor, you can do so by sending an email to letters@dailyreckoning.com.au