That Which Is Too Fearful To Speak: The Demise Of The Consumer Economy

The consumer-debt-based economy is doomed; good riddance. It was nothing more than an elaborate cargo cult based on marketable anxiety.

The consumer-debt-based economy is toast, but everyone's too terrified by its demise to acknowledge this reality, never mind consider a new model. The entire creaking economy is based on a few ideas which no longer work:

1) Create "aggregate demand" (i.e. consumer demand, which then creates business demand) and the economy "grows," people are hired and get paid, and that's good.

2) When consumer demand slumps because people are over-indebted and can't afford to buy more of anything, then "stimulate" demand with massive Central State spending to replace the vanished private demand.

3) Demand is endless. You can never have enough stuff, food, vacations, education, healthcare and toys. Give people free money, or the ability to borrow nearly-free money, and they will spend, spend, spend. This creates "growth" which is always good.

A funny thing happened on the way to the infinite demand/consumption model--or actually, two things:

A. People borrowed all they could afford, and then borrowed more. Now they can't borrow any more, even if the interest rate is low. By some estimates, American consumers need to pay down $4 trillion in debt just to restore the income-to-debt ratios of the early 1980s, never mind the early 1960s.

B. Infinite demand met marginal return in a dark alley, and infinite demand is in the gutter, whoozy and bleeding profusely.

More