From Consumption to Savings......
September 14, 2009
– Comments (18)
Many of you who focus on doom and gloom are missing the point.....we are going through a change unlike any other change in American history since we switched from the agricultural age to the industrial age.
It was a very convulsive time in our history as over 80% of the family farms were foreclosed and many were kicked out of their homes...but thrity years later....we were well on our way to being the world's premier industrial center.
We are now transforming from the consumption age to the savings age.......a transformation that will be every bit as convulsive as the shift to industry from agriculture. Much our current occupations today simply exist to support massive consumption.....as consumers, government and business cut way back spending less and saving more.....most of our jobs will no longer be necessary and pay will be cut dramatically.
We have already seen massive paycuts in a number of industries such as airlines, autos, construction, and real estate sales.....now we are beginning to see it in government and health care(responsible for over 50% of GDP).
The problem is that we have built an infastructure and cost structure geared to massive domestic consumption and few are prepared for the change. Our health insurance, property taxes, mortgage payments etc are all geared to a consumption economy. Let's take a look at retail for example:
A recent book, “Retrofitting Suburbia,” by Ellen Dunham-Jones and June Williamson, notes that in 1986, the United States had about 15 square feet of retail space per person in shopping centers. That was already a world-leading figure, but by 2003 it had increased by a third, to 20 square feet. The next countries on the list are Canada (13 square feet per person) and Australia (6.5 square feet); the highest figure in Europe is in Sweden, with 3 square feet per person.
Today it is over 23 feet per capita. If America were to shut down 50% of all retail outlets, and fire 50% of retail workers....we would still have almost 4X relatively more resources devoted to retail than Sweden.....and retail employs a massive amount of workers in America and is responsible for huge sales tax receipts, property tax receipts and is the basis for trillions in mortgages sitting in our retirement accounts, banks, and insurance companies. If we reduced retail outlets, by 80%....we would still have relatively more than Sweden per captia.
Interestingly, we have reduced new home contruction in America already by 80% in dollar terms and we still have massive vacant inventory out there......auto sales are down 50% and the only way we are moving cars these days if we subsidize the purchased or let people take them for free for 60 days.
Most of our accounting jobs, advertising jobs, architecture jobs, engineering jobs, legal jobs, sales jobs, government jobs, and many other professions and occupations are simply funded by massive domestic consumption. As the fed continues to implement policies cutting off credit and raising interest rates on the private economy, consumption is sure to contract going forward as interest payments suffocate dollars away from good and services and more to savings..
None of this is the end of the world....simply massive convulsive change that you should now be prepared for as we are still in the early stages in 9.09.
Where it goes is anyone's guess...but you know it is going in that direction as the value of practically everything you own is crashing and we are bailing out bankers.
The big question comes with the BIGGEST consumer of all....the U.S. Governments...consuming $6.5 trillion dollars per year (50% and growing percentage of GDP)....right now running a $2 Trillion dollar deficit is supporting an unsustainable level of spending.....soon it will come to an end one way or another as receipts keep shrinking....and when it does at you will be prepared for the change....whether that is a benefit remains to be seen.
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