Incurable Consumerism

So I had hoped that one good thing that might possibly come out of this economic collapse would be the end, or at least, the amelioration, of our culture of consumerism here in America. In recent months, we have seen the national savings rate jump from about -2% (where it had been for years--no joke) to about +5% (most countries average about +10%). This suggested than many Americans were beginning to show some common sense--don't spend what you don't have, but instead start saving so you will have something to spend later.But it seems that we are beyond the reach of reason. This judgment was forced jarringly upon me by the recent issue of Newsweek, the cover of which declares: "I WANT YOU! To Start Spending: Invest in America, Before it's Too Late"

Of course, I assumed at first that it was just a parody of what the politicians have been saying--we've all heard Obama and the rest talk about how we have to get credit flowing again and Americans spending again. But no, this was no parody. The headline of the story inside said "STOP SAVING NOW!" And no, this was no parody either. Within the article, the columnist explained that while no one wanted to go back to rampant credit-driven speculation, nevertheless, we needed to be willing to get back into debt, and to start "investing in America" by spending. I blinked a couple times and reread the offending sentences, and found that yes, indeed, we Americans were being told: "No, don't save, but start investing instead, which means spending." Now, I know I'm not a certified financial planner yet or anything, and my education in economics has been a little informal, but my understanding was that investing was what you did when you saved, and spending is what you did when you didn't want to save/invest. However, so thoroughly have we become convinced that endless consumerism is the only way that we have survived that we have inverted the terminology--investing is now what you do when you spend, and saving is what you do when you're too stupid to spend/invest. I fear now that, as soon as economic conditions improve marginally, Americans are going to gleefully leap back on the train of rampant consumerism until they finally drive right off a cliff (assuming this isn't already the cliff.

PS: My cynicism was mollified somewhat by the appearance of a Time cover story this last week called The End of Excess, which though I didn't take the time to do more than glance at it, appeared to be taking the opposite tack of the Newsweek piece. I shall henceforth get my dose of standard vapid American public opinion from Time, rather than Newsweek

Notes from the Mountaintop

Just in case anyone was on pins and needles waiting for another book review or some Romans 13 tidbits, I'm afraid I must apologize. We're up in the mountains and nine of us are sharing one computer with internet access, so blogging opportunities are minimal; and in any case, I can't post anything off of my computer.

But, I will offer a random slice of life--in fact, a big milestone in my life: I learned to snowboard today! Every time I've skied for the past few years, I've had terrible foot pain, and yesterday it was worse than ever. The boot man told me my feet were quite misshapen and that pretty much only a podiatrist could help me. I'd heard that learning to snowboard was likely to prove a very painful experience, but I figured that if I was going to be in a lot of pain either way, I might as well learn something new while I was at it. And so I did...and there wasn't even much pain involved! (Of course, I've still got a lot of Advil in my system, so I may be singing a different tune this evening.) I can't do anything fancy yet or go too fast, but I can handle an intermediate slope just fine. Tomorrow I'll probably try some of both.

On another note, I never replied to another nit-picky comment by the statistics-monger regarding the national debt. Suffice to say that I mostly agree with your points and shall probably moderate my national debt alarmism, but I would still insist on two major differences from the WWII debt situation. For one, the national debt reached 130% of GDP by the end of WWII...but that was at the end of the crisis. At the end of this fiscal year, the national debt is expected to be at nearly 80% (without counting many off-balance sheet liabilities)...and my guess is that this crisis has a ways to go yet. Hopefully we won't hit 130% again, but...it's possible. The second point is that the total domestic debt is far higher now--corporate, personal, municipal, federal. In WWII, everything besides federal debt was quite under control; the private sector was in solid fiscal condition, and could support a deficit-heavy government. Now, the private sector (whether individual households or businesses) is virtually bankrupt, and it's the deficit-heavy government that's having to help it out. Anyway, enough with that subject. I've got skiing (or snowboarding, rather) to do.

Worldwide Bankruptcy is Already Upon Us...

...We're just hoping we can close our eyes and ignore it till it goes away.
A couple of shocking articles in the past couple days reveal the extent of the crisis.

For years, America's financial condition has been deteriorating far more rapidly than the official numbers would suggest, as bad as those official numbers are. See, the problem is that the US government does not report its assets and liabilities the way that every other entity in the US is required to. under normal accounting rules, we are now $60 trillion in the hole, as you can read here.

Here's an excerpt:
" 'In the seven years of GAAP reporting, we have seen an annual average deficit in excess of $4 trillion, which could not be possibly covered by any form of taxation,' Williams argued.

'Shy of the government severely slashing social welfare programs, federal deficits of this magnitude are beyond any hope of containment, government or otherwise,' he said.

'Put simply, there is no way the government can possibly pay for the level of social welfare benefits the federal government has promised unless the government simply prints cash and debases the currency, which the government will increasingly be doing this year.' "

In short, we're already bankrupt. Sorry, Obama, a stimulus package ain't gonna cut it.

As if that weren't scary enough, the Telegraph reports here that the shockingly rapid collapse of the over-leveraged Eastern European economies, propped up by Western European banks, spells almost certain insolvency for the Eurozone countries--and that sooner, rather than later.

Evans-Pritchard warns:
"Whether it takes months, or just weeks, the world is going to discover that Europe's financial system is sunk, and that there is no EU Federal Reserve yet ready to act as a lender of last resort or to flood the markets with emergency stimulus....
The sums needed are beyond the limits of the IMF, which has already bailed out Hungary, Ukraine, Latvia, Belarus, Iceland, and Pakistan – and Turkey next – and is fast exhausting its own $200bn (€155bn) reserve. We are nearing the point where the IMF may have to print money for the world, using arcane powers to issue Special Drawing Rights. "

Looks like we might finally solve the Third World Debt crisis...though the collapse of the entire worldwide credit system is certainly a steep price to pay.