Replacing Consumerism

Maybe, but consumption is income. We can't all reduce our consumption at the same time.I dunno, though. Do you think they buy less in Europe, or something? My guess is that they just buy different stuff. Do you just not like the stuff Americans buy?

No, what I mean is that economically, consumption has to equal income. Consumption does equal income. They're the same thing. This is just a bromide. "Change is difficult but necessary" doesn't accomplish the impossible, and its impossible for consumption not to equal income. I guess I'm still not clear on what you think is different, exactly. Ok, houses are larger now than they were before. Does that represent a vast change in US attitudes? Or does that represent the fact that Americans are larger and taller now than they were 50 years ago and may actually need more space? Does that represent the fact that it's cheaper to build a larger home than it was 50 years ago, because of technological improvements in home construction? Isn't a larger home just a function of the market equilibrium of price per square foot?

And the demand for them is a function of the cost premium for a larger home. When technology (for instance, pre-fab joist systems) makes it easier and faster to construct a spacious home, it becomes cheaper to construct a spacious home. And at the margin - since people usually buy as much house as they feel they can afford - that results in people buying larger homes.Is that "consumerism"? Or is that economic actors acting rationally to maximize what they can get for their dollar? I bet your father probably prized getting as much as he could for his dollar. Did you think that was "consumerism" when he was doing it, or did you think that was just plain horse-sense?

No, by definition it applies to all the folks living in it. You can take a small subset of that and trivially observe that their income and consumption may not be identical, but that's only a function of the fact that you're looking at a subset of the whole.But now it sounds like your problem isn't with consumerism per se, you just think some people should consume more and others should consume less. So, you're less concerned with the overall level of "consumerism" and more concerned with its distribution. I think you hopelessly have no idea what you're talking about. Rising home sizes don't a priori establish some putative increase in "consumerism." And any analysis of the rise in home sizes has to - has to - include the fact that it's cheaper to get a home at a certain size now than it was 50 years ago in today's dollars.

Yeah, that's true. But advances in technology mean that you can heat the same sized home with less power; that a larger home retains heat better than a smaller one (that's just a function of geometry), that you can have fixtures that use less water, and so on.And, necessarily, some people are going to respond to a lower per-unit cost by consuming more units. Is that "consumerism" or, again, people just maximizing their value for the dollar?

Then I guess I need more than a single narrow trend in new home construction to explain what it is, exactly, that you think is on the rise, here. Do you really think that people in the 50's didn't derive significant satisfaction from owning a specific set of things? We're talking about a time when what it meant to be an American - the "American dream" - was defined by consumption and ownership. Wait, which subset is this? I never defined such a subset. If you now want to talk about people living in crushing debt, that's fine, but then you need to grapple with the fact that those debts are crushing specifically because they're not "consumer" debts, but difficult-to-discharge debts like student loans, medical bills, and mortgages. Traditionally we don't interpret people wanting to get college degrees as "consumerism", but as people making investments in themselves and their own skills. Is that what you're talking about?And moreover debt doesn't change the equation! Those debts don't come out of nowhere; your debt is income which means that it's someone else's consumption - somebody spent some money so you could build a house or go to college. Now you're going to consume some money as an interest payment to service that debt, and that's going to be your creditor's income.Consumption always equals income because they're the same thing. So far that's been your sole evidence that there's something called "consumerism" which is on the rise and "causing all these problems."Look, Jon, I can't help you if you don't do your homework and actually explain what you're trying to say. What is "consumerism"? Why should we believe its "on the rise"? How is it the "cause" of our problems? In other words - why are you being so cagey about what, exactly, you're on about? You've clearly got a hard-on about this; why keep it such a fucking secret? You opened this thread to discuss it. So, discuss already.

Well, no, that's not at all true. Americans spend less than their income:We know this is true because Americans have maintained a positive savings rate for decades:Now, clearly that rate is not now as high as it once was. But we're hardly in any sort of position where Americans consume "more than their income." Indeed, exactly the opposite - we're experiencing a recession entirely as a result of Americans consuming less of their income. Indeed you can see in the first chart how the personal savings rate dramatically increased in 2009 (a year not shown on the bottom chart.) Well, sure. Overwhelmingly the Federal government is engaged in debt-financed wealth transfer from young people like me to old people like your buddy Buzsaw. All those guys who grew up in the 50's and were supposedly so personally responsible, unlike the spendthrift kids of today? They're the group that is overwhelmingly supporting a lavish lifestyle on the public dole. But somehow I guess its only "consumerism" when 25-year-olds spend their own money on iPhones, not when Buzsaw spends my tax dollars to maintain a lavish New York home.

Agreed, and I don't think you're particularly unusual in that regard; Americans own cars because they need them to get around. They buy iPhones because they want a cell phone that can also access the internet - the primary means by which Americans access the internet, these days, is by phone. They own large homes because that's what's available on the market for them to buy.Certainly status-signaling plays a role as well, but it always has. I don't see any indication that status-based spending is on the rise; indeed, most of the "status" brands of things were established in the supposedly "less consumerist" 40's, 50's, and 60's, during the post-war economic boom.Edited by crashfrog, : No reason given.

Or, both.

That's clearly not true. For instance, I can get debt any time I want, but I can only get my paycheck once or twice a month. So, like most people, I may use debt to even out my cash flow despite spending less than my income and maintaining a positive savings rate. In fact that's what most Americans are doing - but, if you average it out over the course of a quarter, hardly any Americans are actually spending more per year than their annual net income. I mean I showed you two different charts that demonstrated that. Well, sure. But there are many, many more Americans than 6,000. The activities or failures of 6,000 Americans hardly counts as "most." It doesn't even count as "some." So people shouldn't take on a mortgage or student loans to pay for college? Even if doing so is likely to earn them much more money in the long run?That makes no sense. Debt is a good thing if used appropriately - to make investments in yourself and your family that will pay for themselves and then some, in the long run. But the year that you buy a home is necessarily a year in which you've "spent more than your income". Should nobody be able to buy a home but the very rich? I can't believe you believe that, or live like that. No, that's incorrect. The Social Security Trust Fund holds government bonds, not IOU's. And what else should it hold? Cash money? That's retarded - interest would destroy it. That's as bad as "saving" your money in a mattress. The SSTF holds government bonds because they grow at a positive net interest rate.

Uh, no. I'm not sure where you're getting that.What I believe is that the government can reduce the deficit by both spending less and raising more revenue. You put it forward as an either/or thing, which makes no sense - the government can do both and reduce the deficit even faster than by doing one thing alone. Well, no, You have to spend the money on paying debt instead of on new consumption. If you just spend less, you stay in debt but your savings grow. But there are two ways to spend more money on paying off debts - increase your income, or spend less on other things. The fastest way to pay off debt is to do both.Generally it's a much better idea to pay off debts than to save money, because the interest rate on your debts is usually much higher than the interest rate any of your savings could earn.

Well, you don't get loaned "non-existent" money, you get loaned someone else's money. They spend money on you, same as if they paid you to do something. In this case, they're paying you to pay them back more money later.Economies are zero-sum, ignoring currency inflation. That's why consumption equals income, everybody's income is someone else's spending. Debt doesn't change that at all, it's just another kind of transfer. People say that but I'd like to see some evidence. The current American savings rate is about as positive as its been since the end of World War II. I think the first-order problem is the stagnating wage and income inequality. The debt situation is a reflection of that, not the source of the problem. Frankly when people purposefully decrease their standard of living that's when you're looking at the real problems. Austerity is a mistake, simply because consumption is income - we can't all deleverage debt without killing all of our incomes as well.

Well, ok. You've heard what I have to say.Now it's your turn - what's "consumerism"? What's your evidence that it's on the rise? Whats your evidence that consumer debt levels are dangerously high? No, you shouldn't be. You should be upset about the various anti-competitive extortions the credit card companies are engaged in. But what does any of that have to do with "consumerism"?Jon, you titled this thread "Replacing consumerism." Well, ok. What is "consumerism"? And what are you going to replace it with? Please be specific.Edited by crashfrog, : No reason given.

Not so much, really. Certainly not in any way that would allow us to actually discuss your topic.Here, try this on for size, maybe you can get a sense of what I'm getting at: when you say that "consumerism" has increased, what measurement of "consumerism" causes you to believe that? Your cite cites the increase in home sizes but you rejected that as a proxy for "consumerism." Well, ok. So what, exactly, is increasing? You haven't even explained what the question is.

Yeah, it does, basically. Banks have "capital holdings requirements" which means that the value of their outstanding debts - that is, the money they owe you, that is, your checking and savings accounts - have to be balanced by the value of their outstanding credits - the money you and others owe the bank - plus a certain amount of "good as cash" capital holdings, so that they can pay out a reasonable number of withdrawals on a timely basis to prevent a "Its a Wonderful Life"-style run on the bank. (In fact, the run on the Bailey Savings and Loan in that film is caused precisely by the failure of BS&L to maintain the legal amount of capital holdings.)Banks can't loan out more than they have, because they would have to borrow it from someone else in order to do so. Banks have a special series of other banks that they can loan from at discounted rates, though; those banks in the US are called the "Federal Reserve Banks" and the rate at which they can borrow money is called the "Prime Rate." You have a similar system of central banking in the UK, probably, but I don't know anything about it. Not exactly; the issue is that they loaned out money that they'll now not get back, in the form of mortgages. Now, they can repossess the home (and have) and until they try to sell it, they can count the original purchase value of the home as part of their capital holdings and stay in compliance with the law. But, none of these homes are actually that valuable.So, these "toxic assets" are an issue because at some point you have to pay the piper and try to get pennies on the dollar for the "book value" of these homes, but doing so puts the bank well below its capital holdings requirement, at which point the FDIC legally has to come in and close down the bank.They didn't loan out money they didn't have; they loaned out money they couldn't afford to lose, and did. How so? "Crisis"? I don't see it. Can you point out the crisis in this graph of public debt vs GDP:There's no particular "debt crisis" because the ratio of public debt to GDP isn't particularly high in your country or mine. It's a political stalking horse, not an actual crisis. The actual crisis is that nearly everybody responded to a liquidity trap by reducing their spending, which caused a crash in aggregate demand.Edited by crashfrog, : No reason given.