It was always said that come what may, you can count on U.S. consumers. Not these days. For nearly 20 years, consumer spending has outpaced income growth in America. Credit everywhere they turned, the wealth effect of the dot com stock market, and then the ATM-like appeal of rising house prices was enough to make the word “budget” foreign to most Americans. Shop ’til you drop was the rallying cry from coast to coast.
Too bad they did just that. We haven’t seen this many dropped consumer corpses in the aisles since John Steinbeck was the contemporary chronicler of American culture.
The current financial crisis and attendant economy that grows nothing but joblessness has kicked consumers in the teeth. Finally giving up on government to limit the gimmicks of financial firms, households have ignored Washington’s efforts to get the binge going again. Instead, Joe Sixpack and his wife are giving the finger to Goldman Sachs, the Treasury, and the Fed and taking care of some toxic assets closer to home. Yes, household balance sheets are getting fixed. People are buying less and saving more, which is catastrophic to the debt-based economy built by government, banks, and big business over the past fifty years or so. A full 70% of the economy depends on Joe buying trifles he doesn’t need to keep trifle manufacturers in business so they can contribute to campaigns and lobbying efforts.
What’s good for Joe, then, ain’t good for the economy. At least not the fraud that the modern economy has become. Wall Street profits come from selling a lot of trifles, and if Joe ain’t buying, earnings won’t grow. The question then becomes: Is Joe buying?
Consumer credit fell at an annual rate of 10.4% in July, erasing a record $21.5 billion. Revolving debt like that on credit cards dropped 8%, while non-revolving debt like auto loans dropped 11.7%. Those came to dollar amounts of $6.1 billion and $15.4 billion respectively. As of July, consumer credit has been shrinking for six months in a row.
Good for you, Joe! Keep up the good work. Cut up those credit cards and start paying cash. Read fine print. Don’t borrow. Save. Send the government, bank, and big business scum back to the drawing board to figure out some new way to suck cash out of a different generation of suckers.
As for the economy, don’t worry. Green shoots, remember? We’ll do just fine on 30% firepower. Hey, it’s better than nothing and in these new happy times, better than nothing is the same as fantastic.
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