Has America learned a lesson about consumption?

posted at 3:30 pm on November 28, 2008 by Ed Morrissey

Stephen Roach believes that the painful economic contraction we’re about to experience will remind Americans of some basic truths about consumption.  In today’s New York Times, Roach says that the period between the last recession and now has been marked by the unique phenomenon of assets-based consumption.  We need a return to income-based consumption, and the transition is going to sting:

Consumers are now abandoning the asset-dependent spending and saving strategies they embraced during the bubbles of the past dozen years and moving back to more prudent income-based lifestyles.

This is a painful but necessary adjustment. Since the mid-1990s, vigorous growth in American consumption has consistently outstripped subpar gains in household income. This led to a steady decline in personal saving. As a share of disposable income, the personal saving rate fell from 5.7 percent in early 1995 to nearly zero from 2005 to 2007.

In the days of frothy asset markets, American consumers had no compunction about squandering their savings and spending beyond their incomes. Appreciation of assets — equity portfolios and, especially, homes — was widely thought to be more than sufficient to make up the difference. But with most asset bubbles bursting, America’s 77 million baby boomers are suddenly facing a savings-short retirement.

Worse, millions of homeowners used their residences as collateral to take out home equity loans. According to Federal Reserve calculations, net equity extractions from United States homes rose from about 3 percent of disposable personal income in 2000 to nearly 9 percent in 2006. This newfound source of purchasing power was a key prop to the American consumption binge.

As a result, household debt hit a record 133 percent of disposable personal income by the end of 2007 — an enormous leap from average debt loads of 90 percent just a decade earlier.

All of this begins with the artificial escalation of home values that began in the 1990s.  Without those increases far outstripping inflation, consumers would not have had the equity to leverage for more spending.  They would not have created a demand for even more debt, which fed on itself in a vicious cycle as government policies created profit on almost any kind of mortgage for short-term lenders.

The entire precipice was built on sand, and it’s now turning into quicksand.  For some, the lesson will come too late.  For the rest of us, it’s a lesson we need to learn for good.  Many of us have heard the advice our parents and grandparents learned in hard economic times: Don’t spend beyond your means.  Many in the previous couple of generations had a well-deserved skepticism about credit, and they’ve been proven right yet again.

While we’re at it, Congress could use an instruction or two in income-based spending, rather than asset-based spending.  We’ve been mortgaging the next several generations in order to pay for our own pet programs for the last several decades.  Maybe it’s time to stop doing that as well.

Here’s a question to ponder: The economy of the 1980s — which its critics like to chide for its excesses — turned out to be a lot more rational than the economy of the 1990s and 2000s, didn’t it?


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A stampede at Sprawl-Mart, camping out at Circuit City.

Consumption? Are we talking tuberculosis?

Kini on November 28, 2008 at 3:34 PM

The worst part is, the politicians are trying to re-inflate this bubble economy. The Naked Emperor and Helicopter Ben are talking about lending directly to consumers and the talk in Washington is all about “stabilizing home prices” and “getting confidence back so consumers will spend” and “getting banks to loan so consumers will spend”.

They realize that a recession is never good for their re-election.

lodge on November 28, 2008 at 3:35 PM

How can you make this post and have it stand right next to one of a guy getting killed during a walmart black friday stampede, and do it with a straight face?

Really, the story is – why aren’t people shopping online? What’s the thrill of going to a store when you can get the exact same stuff for the exact same price online?

lorien1973 on November 28, 2008 at 3:35 PM

Nope, we’ll keep on standing in line for the new cell phone, video game or flat screen, or any other gadget we just CAN’T live without whether we can offord it or not.

Tony737 on November 28, 2008 at 3:36 PM

While we’re at it, Congress could use an instruction or two in income-based spending, rather than asset-based spending. We’ve been mortgaging the next several generations in order to pay for our own pet programs for the last several decades. Maybe it’s time to stop doing that as well.

Entitlements will have to go away for that to happen. It will not happen voluntarily. We are doomed.

zmdavid on November 28, 2008 at 3:39 PM

This led to a steady decline in personal saving. As a share of disposable income, the personal saving rate fell from 5.7 percent in early 1995 to nearly zero from 2005 to 2007.

Personal savings rate is inaccurate. It does not include capital gains from stock market, real estate, etc. (Yes, I know they are down at the moment, but that’s besides the point).

With more people invested in the market than ever before, the savings rate -should- be lower than ever cuz it is cannot be factored into the savings rate.

lorien1973 on November 28, 2008 at 3:39 PM

Worse, millions of homeowners used their residences as collateral to take out home equity loans.

Also…This is why they are called “home equity loans” Heh.

lorien1973 on November 28, 2008 at 3:41 PM

Many of us have heard the advice our parents and grandparents learned in hard economic times: Don’t spend beyond your means.

God, it’s so simple, yet so hard for people to understand. If you can’t afford to pay cash for it, don’t buy it. How hard is that? Use your credit card to buy a pair of scissors … then use them to cut your credit card into teeny little pieces. The only money you should owe is for your house and maybe a car and student loan. That’s it, nothing else. If you survived this long without it, then you don’t really need it. Remember, credit cards were Satan’s idea. You buy something with one and you’re really paying twice as much for it. Chop ‘em up, now.

Tony737 on November 28, 2008 at 3:43 PM

Just one thin wafer

Kini on November 28, 2008 at 3:43 PM

The worst part is, the politicians are trying to re-inflate this bubble economy.
lodge on November 28, 2008 at 3:35 PM

You got that right. They are doubling down on idiocy. It’s not enough to have squandered the dominant position we had post WW2, now we’re just going to run up government debt to try to keep it going and pass the costs on to people who are babies now. It’s beyond reckless, it’s immoral.

forest on November 28, 2008 at 3:43 PM

lorien1973 on November 28, 2008 at 3:35 PM

Lorien, I wish I could share that thought. But I can not.

I feel for people (including those in my home State and Hawaii) who can’t get what they would like online due to “shipping costs”.

Most of the lower 48 can get their shipped free.. as I and Hawaii have to pay an extra shipping charge for anything online. UNLESS they ship it to the Stores.

I just bought VERY expensive snowshoes for the BF for Christmas online via REI. If I would have had to pay the shipping, it would have been at least 16-42 extra dollars. I vouched for waiting a little longer and let the go to the store to save some money.

Most places up here and in Hawaii do not ship to the stores. Radio Shack is one who ships to it’s stores in the Lower 48, but not up here. What a bummer because I wanted to get some cool stocking stuffer stuff.

upinak on November 28, 2008 at 3:44 PM

Some people use this logic (well, a co-worker of mine, anyway):
“I don’t need the widget.
But it is on sale at $100 off the regular price.
So I buy it and justify that I just made an easy $100. (Since if I bought it a the regular price it would have cost me $100 more.)
If I keep this up soon I will be a millionaire in money I saved by buying.”

albill on November 28, 2008 at 3:44 PM

All this quoted stuff is bullcrap, Ed.

household debt is up because banks were writing home loans with 0 down (making your debt higher) or letting people buy houses that were 4x or 5x their annual income, instead of a 2x or 3x like it used to be. People were buying more expensive houses, with money they did not have; so their household is gonna be high. Of course. It’s not because people are pulling out home equity loans. It’s a minor part of the equation.

You can only do home equity loans for 80% of a house’s current value (they appraise at the time of the loan as well).

lorien1973 on November 28, 2008 at 3:45 PM

Let us not forget what is at the epicenter of the financial meltdown — Government coercing banks to make loans to people who could not afford to repay them, Without CRA 1977, and follow on legislation and rules, there would have been no meltdown.

As Reagan has said — Government is not the solution, it IS the problem.

Reject Obamunism and the New Deal II.

tarpon on November 28, 2008 at 3:45 PM

That’s right, baby. Next in line for the bailout will be Madison Avenue cuz there ain’t no more “consumin’ going on out there.”

BigD on November 28, 2008 at 3:46 PM

lorien1973 on November 28, 2008 at 3:45 PM

In some cases there are homes being bought with only 10% down or none at all (first time and veterans loans). Even if appraised at the time of the loan.

upinak on November 28, 2008 at 3:46 PM

upinak on November 28, 2008 at 3:44 PM

Yep. I run an online business. I know how you AK and HI people feel about the shipping rates.

What’s funny is that UPS opened up ground shipments to AK.HI this year, right? But the price for UPS ground is only $3-4 cheaper than the 2 day service – which used to be the only way UPS would ship to AK HI.

lorien1973 on November 28, 2008 at 3:46 PM

What’s funny is that UPS opened up ground shipments to AK.HI this year, right? But the price for UPS ground is only $3-4 cheaper than the 2 day service – which used to be the only way UPS would ship to AK HI.

lorien1973 on November 28, 2008 at 3:46 PM

No they didn’t open it up. Everyone thinks they did.

Honestly I LOVE USPO service. gets here in the same amount of time and is in a metal box for me to open and get instead of waiting at my door. It is also 20-50 dollars cheaper to ship things.

upinak on November 28, 2008 at 3:48 PM

lorien1973 on November 28, 2008 at 3:46 PM

Ummm do you have the site I can look at?

upinak on November 28, 2008 at 3:49 PM

UPS opened up ground shipments to AK.HI
lorien1973 on November 28, 2008 at 3:46 PM

Ground shipments to Hawaii? That’s a neat trick! I think they are using the term “ground” figuratively.

zmdavid on November 28, 2008 at 3:49 PM

“I don’t need the widget.
But it is on sale at $100 off the regular price …
– Albill

Ha. That reminds me of a skit by Gallagher. He says “A woman can save you money by buying something you don’t even need … because it was …” And the audience says “ON SALE!” He says “And I didn’t even hold up a cue card!”

Tony737 on November 28, 2008 at 3:50 PM

upinak on November 28, 2008 at 3:48 PM

They did. I have a UPS account. Ground is available to AK and HI, now. Anyone who says it’s not, is lying or doesn’t feel like updating their software. It’s a rip off though. USPS is far cheaper.

lorien1973 on November 28, 2008 at 3:50 PM

Eliminate the mortgage interest deduction.

corona on November 28, 2008 at 3:51 PM

zmdavid on November 28, 2008 at 3:49 PM

It flies there, of course. From what I’m told, it takes the same method as the 2day packages, which is why it’s so expensive.

Ummm do you have the site I can look at?

upinak on November 28, 2008 at 3:49 PM

Um, don’t want to advertise on here. Got a site I can leave a comment on?

lorien1973 on November 28, 2008 at 3:52 PM

Leave it to upinak to make the discussion thread about her.

BigD on November 28, 2008 at 3:53 PM

lorien1973 on November 28, 2008 at 3:52 PM

cmahnken2003 at yahoo

upinak on November 28, 2008 at 3:53 PM

I guess Hope and Change has been around a lot longer than we all thought.

http://www.youtube.com/watch?v=P36x8rTb3jI

It doesn’t seem to be any lesson learned. Does it?

I blame Social Security. It’s always someone elses fault, not mine.

Kini on November 28, 2008 at 3:54 PM

Leave it to upinak to make the discussion thread about her.

BigD on November 28, 2008 at 3:53 PM

Excuse me?

Lorien pointed out something and I responded. I then asked about his site.

Do you have a problem there you repugnant little turd or are you now my new cyber stalker?

upinak on November 28, 2008 at 3:54 PM

Ground shipments to Hawaii? That’s a neat trick! I think they are using the term “ground” figuratively.

zmdavid on November 28, 2008 at 3:49 PM

It’s still ground, although underwater. Just think of it as a different atmosphere.

Anyone wonder if these are the people that voted for Hope and Change?

Kini on November 28, 2008 at 3:59 PM

Kini on November 28, 2008 at 3:59 PM

It’s UPS. They punt them over the ocean.

Ever seen Ace Ventura? Sadly, that intro is not far from reality. The stories I’ve heard from customers would shock you LOL

lorien1973 on November 28, 2008 at 4:00 PM

Upinak…making more friends I see

Jamson64 on November 28, 2008 at 4:00 PM

A good economic defense begins by talking loud and fresh fruit.

Kini on November 28, 2008 at 4:02 PM

Eliminate the mortgage interest deduction.

corona on November 28, 2008 at 3:51 PM

YEAH, works for those renting or in public housing. Eliminate welfare until ALL ILLEGAL ALIENS are removed from the country.

HornetSting on November 28, 2008 at 4:05 PM

Eliminate the mortgage interest deduction.

corona on November 28, 2008 at 3:51 PM

Because a big tax increase is just what we need?

Hollowpoint on November 28, 2008 at 4:06 PM

Kini on November 28, 2008 at 4:02 PM

That didn’t end like I expected LOL

lorien1973 on November 28, 2008 at 4:06 PM

“Worse, millions of homeowners used their residences as collateral to take out home equity loans.”

My gut guess would be that much of that money was used to pay off consumer debt (credit cards, car loans, vacations, etc) – only to run up that bill, again.

Debt, debt, debt, debt. That’s the next house of cards to fall down on Uncle Sam: hundreds of billions in credit card debt.

The commercial banks will scream for a bailout ’cause the financial guys got one. Whaa!

This economy will continue to ‘pancake’ until all this debt has settled out and found a sucker to cover it.

On the surface, that sucker is Uncle Sam, but he will do what he’s always done – borrow from abroad – until we are de facto indentured servants to China, Europe & the Mid East.

It’s when we can’t make those pay backs anymore and have to go hat-in-hand to the IMF for ‘debt relief’ that this global economy will really get ugly.

locomotivebreath1901 on November 28, 2008 at 4:08 PM

Kini on November 28, 2008 at 4:02 PM

Don’t you live in Hawaii? I feel SO SORRY FOR YOU! Have any margaritas? It’s Friday!

HornetSting on November 28, 2008 at 4:08 PM

I`ve been keeping my spending tight as long as I`ve been making money. A lesson I learned from my dad.

ThePrez on November 28, 2008 at 4:08 PM

Leave it to upinak to make the discussion thread about her.

BigD on November 28, 2008 at 3:53 PM

It’s a thread about consumption. upinak is perfectly on topic to discuss shipping issues with AK and HI.

RushBaby on November 28, 2008 at 4:09 PM

Has America learned a lesson about consumption?

Not yet we haven’t.

We will learn the lesson after bailout mania ends with failure. The bailouts show that we (at least our government) is still in denial about the problem. The bailouts have about as much chance of working as the Nigerian e-mail scam.

zmdavid on November 28, 2008 at 4:11 PM

upinak on November 28, 2008 at 3:53 PM

upinak, got the batcave ready? I’ve got tickets to Alaska.

HornetSting on November 28, 2008 at 4:11 PM

Eliminate the mortgage interest deduction.

corona on November 28, 2008 at 3:51 PM

we need MORE tax deductions right now

UNREPENTANT CONSERVATIVE CAPITOLIST on November 28, 2008 at 4:11 PM

Don’t spend beyond your means.

A lesson drilled into all of us who were raised by “Depression survivor” parents. (I’m 62.) I can’t tell you how many times I’ve been in a store such as 7-11, and watched a 20-something buy coffee or cigarettes using a credit card. It just makes want to scream.

oldleprechaun on November 28, 2008 at 4:16 PM

Don’t spend beyond your means.

While I agree with that, if a politician sees two nickles, they believe it’s their devine right to take at least one of the nickles.

Our 401k’s are one of the few tools Americans have used to save and already the politicians are eyeing that money trying to decide how to take it for their use.

RJL on November 28, 2008 at 4:17 PM

upinak, got the batcave ready? I’ve got tickets to Alaska.

HornetSting on November 28, 2008 at 4:11 PM

They were inflated and they are Bear dens.

upinak on November 28, 2008 at 4:17 PM

It just makes want to scream.

s/b “It just makes me want to scream.

oldleprechaun on November 28, 2008 at 4:18 PM

They were inflated and they are Bear dens.

upinak on November 28, 2008 at 4:17 PM

Got it. Thanks. Does the bear come with the den or do I have to pay extra?

HornetSting on November 28, 2008 at 4:19 PM

Don’t spend beyond your means.

While I agree with that, if a politician sees two nickles, they believe it’s their devine right to take at least one of the nickles.

See two nickels, confiscate one, then spend three.

forest on November 28, 2008 at 4:20 PM

Here’s how home mortgages work…. in my world.

When I first came here to Hawai’i, this was all swamp.
Everyone said I was daft to build a home on a swamp, but I built in all the same, just to show them.

It sank into the swamp. So I built a second one.

That sank into the swamp.

So I built a third. That burned down, fell over, then sank into the swamp.

But the fourth one stayed up. And that’s what I’ve got, the strongest home in all of Hawai’i.

Kini on November 28, 2008 at 4:21 PM

Hornet leave the poor girl alone.Please.

Jamson64 on November 28, 2008 at 4:22 PM

Don’t you live in Hawaii? I feel SO SORRY FOR YOU! Have any margaritas? It’s Friday!

HornetSting on November 28, 2008 at 4:08 PM

In less than 40 minutes, it’ll be after 12 ~˛~

Kini on November 28, 2008 at 4:24 PM

Got it. Thanks. Does the bear come with the den or do I have to pay extra?

HornetSting on November 28, 2008 at 4:19 PM

Bear is free and is good at defending you home/den against trolls such as jamson64.

Everyone should have a Kodiak Grizzly or a Genuine Polar Bear Protector for your “Den”.

upinak on November 28, 2008 at 4:24 PM

UNREPENTANT CONSERVATIVE CAPITOLIST on November 28, 2008 at 4:11 PM

We need more deductions and tax cuts, but not at the margins.

I like the mortgage interest deduction, because I benefit from it. But I don’t like getting tax deductions because I’m doing something the government approves of.

I’d much rather prefer a deduction in the income tax rate – which would save me more than the interest deduction. And a capital gains tax cut or elimination – which would not directly affect me right now.

lorien1973 on November 28, 2008 at 4:24 PM

In less than 40 minutes, it’ll be after 12 ~˛~

Kini on November 28, 2008 at 4:24 PM

Pineapple sounds good right now.

upinak on November 28, 2008 at 4:25 PM

HornetSting, feel sorry for me?

Silly, I live in paradise…. where do you live?

Kini on November 28, 2008 at 4:25 PM

If Kini lives in HI, why are we deprived of pictures of Robin Master’s estate from Magnum PI? :(

lorien1973 on November 28, 2008 at 4:26 PM

Pineapple sounds good right now.

upinak on November 28, 2008 at 4:25 PM

It makes a good mix with rum!

lorien1973 on November 28, 2008 at 4:26 PM
If?
Yup, it’s a tough life here.

Kini on November 28, 2008 at 4:30 PM

Hornet leave the poor girl alone.Please.

Jamson64 on November 28, 2008 at 4:22 PM

WTF?

HornetSting on November 28, 2008 at 4:36 PM

HornetSting, feel sorry for me?

Silly, I live in paradise…. where do you live?

Kini on November 28, 2008 at 4:25 PM

I know, Kini. You live in the land of beauty. Do you have a guest room? I say, it’s five o’clock somewhere. Let’s have a margarita. I’ll even bring the tequila. I live in the fifth ring of hell known as New Mexico.

HornetSting on November 28, 2008 at 4:38 PM


Zimbabwe’s inflation rate surges to 231,000,000%

…………………… it’s only a matter of time.

Seven Percent Solution on November 28, 2008 at 4:38 PM

Column written by Whatsizname Roach, Chairman, Morgan Stanley, Asia.

And what is his solution to the problem he so accurately highlighted?

Increased government investment (read that as TAXES) in infrastructure and alternative evergy production!!

This douchebag is nothing but a shill for higher taxes and hopeandchange. It’s no suprise he’s heading part of the industry that brought us Great Depression II.

Wealth is created by taking a material and making it more valueable, so that someone wants or needs it enough to pay more for it than it cost to make.
National wealth is created when a society as a whole creates more value than it consumes.
Anything less than that is a sham.

OneEyedJack on November 28, 2008 at 4:39 PM

My father said that there are only two things one should buy on credit…a home (or land) and a car…everything else should be cash on the barrel head. Over the past several decades it has been ignored by too many. Does a family really “need” a Wii or Playstation or 54-inch plasma TV?

The banks and credit card companies have made a fortune over the years pushing credit cards and credit card debt. And why not? It is a cash cow for them…until the past 90 days…but still remains a major source of corporate income, and will.

Don’t spend beyond your means. Was pretty sage advice until politicians started pushing the government to backstop loans and grants to folks who had no business buying homes for lack of income and credit worthiness.

Something for nothing. Always a vote getter. And who ends up paying for all of this? Those unfortunate few who make their payments on time, have good credit and pay their taxes, have steady jobs…as they carry on their backs the millions and millions who do not.

coldwarrior on November 28, 2008 at 4:40 PM

And another frikkin thing….GOVERNMENT does not create jobs. It takes wealth created by others in the form of taxes and spends wealth, sometimes to do worthy things, but it is not investment in infrastructure, it is just spending.

OneEyedJack on November 28, 2008 at 4:41 PM

A lesson drilled into all of us who were raised by “Depression survivor” parents. (I’m 62.) I can’t tell you how many times I’ve been in a store such as 7-11, and watched a 20-something buy coffee or cigarettes using a credit card. It just makes want to scream.

oldleprechaun on November 28, 2008 at 4:16 PM

To be fair, sometimes it’s a check card, not a credit card. Mine is linked to my bank account and works like a debit card/writing a check-hybrid thing. You can have them run it as a credit card, if it’s a place that doesn’t do debit cards and only takes Visa or MC or whatever, but unless you have overdraft protection, it won’t go through if you don’t have the funds in your account. I like it because it means I don’t have to stop at the ATM to withdraw cash very often…I keep $25 in my wallet for an emergency, and some more stashed in my glovebox, but other than that, out comes the check card to pay for everything, even a $1.99 coffee. *shrug* I do suspect that some people really do charge everything, though. Meh.

JeepGirl on November 28, 2008 at 4:42 PM

HornetSting on November 28, 2008 at 4:38 PM

Your romm have been made! :)

Kini on November 28, 2008 at 4:44 PM

Zimbabwe’s inflation rate surges to 231,000,000%

Maybe they can chop some zero’s off that inflation rate.

They did it with the currency and that worked out well…

lorien1973 on November 28, 2008 at 4:45 PM

HornetSting on November 28, 2008 at 4:38 PM
Your romm have been made! :)

Kini on November 28, 2008 at 4:44 PM

Seriously, my husband and I are planning a vacation to Hawaii. Just have to get over the long flight. It is truly beautiful. You were a forward thinker in making your home there.

HornetSting on November 28, 2008 at 4:46 PM

Got it. Thanks. Does the bear come with the den or do I have to pay extra?

HornetSting on November 28, 2008 at 4:19 PM
Bear is free and is good at defending you home/den against trolls such as jamson64.

Everyone should have a Kodiak Grizzly or a Genuine Polar Bear Protector for your “Den”.

upinak on November 28, 2008 at 4:24 PM

I have a big black dog with long sharp teeth. I am sold on the Grizzly, though. Think we can send one UPS ground to Jamson64?
What as asshat.

HornetSting on November 28, 2008 at 4:47 PM

America is a modern marvel of consumption.
She is also marvels in production.
Roach describes the excess without providing a redoubt.

Randy

williars on November 28, 2008 at 4:50 PM

wan the usa and the world to go into a depression then just consume less.

consumption is good.

why do you think they call the stuff you buy cuz you want it GOODS!?!?!?

the idea that consumption/consumerism is bad is a postmodern leftist bit of BS.

poverty sucks cuz they can;t buy any goods.

sheesh.

reliapundit on November 28, 2008 at 4:55 PM

You were a forward thinker in making your home there.

HornetSting on November 28, 2008 at 4:46 PM

I worked, saved long and hard to get this slice of paradise.

Right now, vacation bargains abound. Depending on what you like to do, your dollar can go far. Before we moved here, we would rent a house for a week or two and then island hop to the next rental location.

It’s amazing what fiscal responsibility can do and buy.

Kini on November 28, 2008 at 4:58 PM

Has America learned a lesson about consumption?

We are a long way from learning that lesson.

We will be getting close when the government changes the tax code. Consumption via housing is built into the tax code through the mortgage deduction. It should come as no surprise that when congress in its wisdom removed the interest deduction but left it in housing that the bubble was created and houses became ATM’s. Housing loans became car loans, furniture purchases, travel etc.

Unless the much discussed recession/depression lasts at least 24 months with double digit unemployment and another 30% drop in housing prices we will have learned nothing. Paulson and crew at this very moment are trying to avoid that lesson with the knowledge that 70% of our economy is based on conspicuous consumption.

Next up in avoidance will be the policies of Obama, Reid and Pelosi. There’s a reason the majority voted for these folks.

patrick neid on November 28, 2008 at 4:59 PM

I learned that I should always pay off my credit card when I get the bill when I was seven years old. :) I learned about a budget when I was nine. These things are not rocket science; it is just that many people don’t want to live such an austere lifestyle.

Illinidiva on November 28, 2008 at 5:00 PM

Next up in avoidance will be the policies of Obama, Reid and Pelosi. There’s a reason the majority voted for these folks.

patrick neid on November 28, 2008 at 4:59 PM

Not a reason but an explaination,IGNORANCE.

Les in NC on November 28, 2008 at 5:07 PM

Not a reason but an explaination,IGNORANCE.

Les in NC on November 28, 2008 at 5:07 PM

It may appear as ignorance to you Les but to them it was smart. If we are circling the drain they want their piece via entitlements, health care and what not. As to it increasing the national debt they could care less. They look out and see Bush and Paulson bailing out Wall Street etc with trillions of their dollars and they basically think we are the stupid people. We are letting this happen and getting nothing in the balance.

They want their free shit and they want it now. Obama, Pelosi and Reid are going to do their best to make it happen.

patrick neid on November 28, 2008 at 5:17 PM

Honestly I LOVE USPO service. gets here in the same amount of time and is in a metal box for me to open and get instead of waiting at my door. It is also 20-50 dollars cheaper to ship things.

upinak on November 28, 2008 at 3:48 PM

Maybe YOU like USPO, but as a merchant I hate it because there is no effective tracking for shipments, and no effective recourse when they screw up delivery or damage the package.

I also hate it as a citizen, because we subsidize the cost difference.

UPS and FEDEX both have “ground” service to AK and HI. It isn’t really “ground” (the HI packages don’t have to swim, and the AK packages don’t necessarily have to trek up the ALCAN highway)…just a cheaper shipping option with looser delivery time guarantees.

Both UPS and FEDEX offer POSITIVE TRACKING: something the USPS will never implement because it will show up all their bottlenecks and inefficiencies. UPS and FEDEX use tracking to improve their service every year. The USPS would rather not know about its problems…and service degrades every year.

Biggest ripoff is to US territories (like USVI, PR, Guam, etc.), where USPS and Congress have negotiated a sweetheart deal for the USPS. USPS gets to treat these shipments as internal US shipments, while UPS and FEDEX have to EXPORT and IMPORT these shipments. Taxpayers, of course, pay for this foolishness.

landlines on November 28, 2008 at 5:20 PM

patrick neid on November 28, 2008 at 5:17 PM

Which is exactly why I call it ignorance. Stupid can’t be fixed, ignorance can and hopefully will in 2010. No offense to you was intended in my post.

Les in NC on November 28, 2008 at 5:27 PM

Credit is the scourge of civilized society, and if anything ever causes the collapse of this great nation, it will be that we’ve over-leveraged ourselves into extinction. The federal government is setting a [sarcasm]fine[/sarcasm] example for all of those spendthrift Americans out there by doling out $700 billion worth of hair o’ the dog rather than allowing the market to correct itself (which, given time, it would). I have a theory that credit is responsible for the slow growth in wages over the last 20 or so years. Why should my employer give me a raise? I don’t need one; I can just borrow the money! Never mind if I don’t have the means to pay it back! I can put all my fancy meals out on a credit card, and my new iPod and my new cell phone. It’s not like you ever have to REALLY pay for this stuff. Credit and government subsidies are like two sides of the same evil coin. If Medicare and Medicaid didn’t exist to drive up the cost of health insurance for EVERYONE, we wouldn’t need employers to subsidize our insurance; we could actually pay for it out of pocket. Housing? Same thing. What if Freddie Mac and Fannie Mae weren’t around to facilitate mortgages for people who can’t afford them? Maybe home values wouldn’t have become so overinflated over the last 10 years, putting home ownership out of reach for many Americans, not just the poor. What if there weren’t a gajillion different student loan options available for people to attend college? Maybe the cost of higher education wouldn’t skyrocket 10% consistently year after year. If the ONLY way people could afford college was via modest financial aid and scholarships and waiting tables for extra cash, I don’t know, maybe it wouldn’t cost so much to go to school? Because if people HAD to pay for it out of pocket, you can bet it wouldn’t cost what it does. The only justification for education costs constantly increasing is that the administrations at these schools know they can get by with it because these kids can just borrow the money and spend the rest of their working lives paying off the debt.

Anyway, I feel comfortable making these declarations because I’ve learned all of these lessons the hard way. Nowadays, if I don’t have the cash, I don’t buy it. It’s meant some sacrifices of course, but it is well worth the peace of mind. It’s unfortunate more Americans haven’t arrived at this realization yet.

NoLeftTurn on November 28, 2008 at 5:29 PM

Biggest ripoff is to US territories (like USVI, PR, Guam, etc.), where USPS and Congress have negotiated a sweetheart deal for the USPS. USPS gets to treat these shipments as internal US shipments, while UPS and FEDEX have to EXPORT and IMPORT these shipments. Taxpayers, of course, pay for this foolishness.

landlines on November 28, 2008 at 5:20 PM

Plus the Post office gets away with 6-7 day delivery window for a two day delivery package. We still buy it because the delivery rate does approach 100% where normal could take a month and never show up here in the VI or in the states. They just completed a postal study that confirmed our complaints and they laid the blame on PR for the delays.

patrick neid on November 28, 2008 at 5:32 PM

landlines on November 28, 2008 at 5:20 PM
patrick neid on November 28, 2008 at 5:32 PM

If you live where you can’t get items except for the United States Postal Service/Office… then why bitch about it?

I do not want to pay for the same thing I am getting shipped up to me, at 100/200% more then I need to.

You can pay 13.00 for overnight… I pay 60.00. See a problem here?

BTW Alaska and Hawaii get thier mail “shipped” via FedEx and UPS on their planes. Do you see a problme here? I do.. and one reason I won’t pay for FedEx or UPS… I am paying for them to send the “regular mail” up here as well.

I have had more stuff stolen from FedEx and UPS then the USPS as well. Sorry guys….

upinak on November 28, 2008 at 5:40 PM

Hey HotAir gang,

I’m 2/3′s through Peter Schiff’s book “Crash Proof”. He wrote it in 2007 but boy is he right on. Over the next couple of years, get your debt in dollars and assets out of dollars. The big one is here.

Get ready for tough times.

silver lining: We can blame Obama and the Dems. Cool.

Sapwolf on November 28, 2008 at 5:52 PM

Three hints from a former debtor:

1) Slice up the credit cards. Get debit cards. Can’t spend if it ain’t in the account.

2) Don’t buy things that go out of fashion.

3) Learn the concept of “enough”. It is possible to have enough.

Have enough, before you know it you’ll find yourself content. Contentment isn’t a bad thing.

Being “edgy”, being “dangerous”, in short being the smarmy little self-fascinated moron who always has impress, to brag, or to preen makes one tiresome, not admired. Buy what you need, save what’s left if there is anything. You can live for the moment and still save a little over for the next moment when it arrives….

…you won’t be invited to any of the “smart” parties, but you can get your revenge by not inviting any of the “smart” parties over for a beer…to see how a grown-up lives….

Puritan1648 on November 28, 2008 at 6:20 PM

A Champagne diet on a bear budget. Has anyone seen the price of some beers these days?

Feed the Pig

Kini on November 28, 2008 at 6:30 PM

Sapwolf on November 28, 2008 at 5:52 PM

Does Schiff advocate not paying off debt now but to wait for the dollar to become worthless? I have some credit card debt but am wondering if I should pay it off when I get some money. Maybe I should put that money into beans and ammo and let the debt ride until it’s worthless?

keep the change on November 28, 2008 at 6:39 PM

Credit is the scourge of civilized society….

NoLeftTurn on November 28, 2008 at 5:29 PM

…farmers have been living from pillar to post on credit for a coon’s age…there’re plenty of stories about some farmers over-extending (it came home to roost back in the late ’80′s), but farmers are, by and large, good businessment in a credit-dependent, market-dependent business…there’re still farmers out there….

…buildings and infrastructure improvements aren’t built on a “cash-only” basis, nor are innovations brought to the public without someone taking a chance and financing the dice to roll….

If Medicare and Medicaid didn’t exist to drive up the cost of health insurance for EVERYONE, we wouldn’t need employers to subsidize our insurance; we could actually pay for it out of pocket. Housing? Same thing. What if Freddie Mac and Fannie Mae weren’t around to facilitate mortgages for people who can’t afford them?…What if there weren’t a gajillion different student loan options available for people to attend college? Maybe the cost of higher education wouldn’t skyrocket 10% consistently year after year.(emphasis added)

…oh…now here I’m gonna have to agree with you….

…all those rackets you’ve cited are great examples of the one-upsmanship of high finance…a guy needs $1000 to buy service “A” from slicker “B”, but only has $500…well, our young rube goes to schiester “C” to get a bucket o’ money…and, then, as if by magic, next year it’s $1200….

…what’s the cost of the “average home” in the country? Hovering around $120-150? And, for what? When I’m out and around in the smarter (read: gated) neighborhoods, I’m seeing 2×4 framed houses, faced with drywall within and crap without, with no yards to speak of…which’ll be ghettos in 20 years…going for half-a-mil in South Texas…South Texas, for heaven’s sake! We aren’t talkin’ Malibu or Alexandria or South Bloody Beach! Talk about value-for-money! Half-a-mil to be told what you can park in your driveway, living next to some uptight yuppie, only a “mow-strip” separating your gold-plated hovels?

…colleges teaching counter-intuitive social-engineering…doctors are scratch their pates bald trying to fit the procedure they’ve just done into some weird Medicare template…and the “entitled” can live like kings until next payday, when the rest of us begin to pick up their bill…the cost of crap is escalating….

…but, it isn’t the fault of credit…it’s an utter lack of discipline, accountability, and a segment of society willing to rush like newly-minted mothers, spit-moistened hankies at the ready, to wipe the faces of anyone who’s incurred the least little dollop of consequence….

…Mr. Brokaw’s “Greatest Generation” was great because it went into the maelstroms of the Depression and World War Two with character…their travails only allowed it to come to the fore, displaying what was already there….

…it’s a shame that this greatest generation didn’t raise their kids better…in fact, they raised a crop of spindly, self-fascinated, self-righteous, narrow-minded, big-mouthed, selfish, perpetually adolescent pricks…who think themselves entitled to a home-run every time they pick up a bat…failure isn’t an option because failure makes them cranky….

…how one deals with failure is a window on your character…and sadly, on your upbringing….

…the Boomer and subsequent generations owe the world an apology….

Puritan1648 on November 28, 2008 at 6:41 PM

Hey HotAir gang,

I’m 2/3’s through Peter Schiff’s book “Crash Proof”. He wrote it in 2007 but boy is he right on. Over the next couple of years, get your debt in dollars and assets out of dollars. The big one is here.

Get ready for tough times.

silver lining: We can blame Obama and the Dems. Cool.

Sapwolf on November 28, 2008 at 5:52 PM

Peter Shiff , Jim Rogers.

They both explain the doom of this debt economy.

the_nile on November 28, 2008 at 6:43 PM

…farmers have been living from pillar to post on credit for a coon’s age…there’re plenty of stories about some farmers over-extending (it came home to roost back in the late ’80’s), but farmers are, by and large, good businessment in a credit-dependent, market-dependent business…there’re still farmers out there….

…buildings and infrastructure improvements aren’t built on a “cash-only” basis, nor are innovations brought to the public without someone taking a chance and financing the dice to roll….

Puritan1648 on November 28, 2008 at 6:41 PM

That’s lending for investing/production , the farm produce stuff. America has been lending for consumption.

the_nile on November 28, 2008 at 6:47 PM

upinak on November 28, 2008 at 3:54 PM

…don’t let it melt your mukluks….

…folks may need to re-read the definition of “online community”…folks come here, meet, opine…and sometimes information not strictly adhering to the line of the thread breaks out….

…for my part, I agree…the difference between virtual and actual shopping is that virtual shopping is convenient for some items — books, music, videos (things that don’t have sizes, generally), and things you’ve either have seen and maybe handled before; and things you don’t need to handle — and is damned inconvenient…and it usually, not occasionally, involves some shipping cost.

I’m a big fan of eBay, and have been skunked once or twice because someone else’s idea of my hat size isn’t their idea of my hat size…but that’s about it. I buy there knowing that there’ll be shipping to factor in…I’ve bought a few items where the shipping was substantially more than the cost of the item….

…and I defy anyone to buy a confy pair of boots online…can’t be done…well…not with my hooves, anyway….

…as to your tete-a-tete with Mr. L, good on both of ya…I’m curious what he sells/makes/markets/palms off…we should be buying from eachother…and helping eachother…that’s what community is all about….

…a rigidly and impersonally political blog is an inhuman and sterile thing, after all….

Puritan1648 on November 28, 2008 at 7:12 PM

That’s lending for investing/production , the farm produce stuff. America has been lending for consumption.

the_nile on November 28, 2008 at 6:47 PM

…allow me to add “also” to your second sentence, between “has” and “been”…and, I’d agree…putting America into the position of being a Shylock is rather straining the Constitution….

Puritan1648 on November 28, 2008 at 7:14 PM

Consumers are now abandoning the asset-dependent spending and saving strategies they embraced during the bubbles of the past dozen years and moving back to more prudent income-based lifestyles.

You do realize Ed that, bar something like unemployment going above 10% and/or interest rates on loans doubling, this phenomenon will have a half life of about a couple of months.

MB4 on November 28, 2008 at 7:21 PM

Credit cards aren’t so bad. So long as you have the discipline to use them properly.

I have one, I use it for most of my purchases, but I pay it off every month.
This allows me to keep my money in my savings account for an extra week or three, and I get points with each purchase, that I use to pick up $50 gift card two or three times a year.

I don’t have an annual fee either.

MarkTheGreat on November 28, 2008 at 7:48 PM

Credit cards aren’t so bad. So long as you have the discipline to use them properly.

I have one, I use it for most of my purchases, but I pay it off every month.

MarkTheGreat on November 28, 2008 at 7:48 PM

…and morphine is a dandy substance if used with properly and with discipline….

…look about you and show me signs of discipline….

…the point is that folks are actually waved away from discipline in return for short-term gain…we need to think long-term….

…credit cards leave paper trails, which’re nice…credit cards in business are a must…credit in general, if used properly, is what keeps industry spinning, crops a’planting, and cars goin’ off the show-room floor….

…but, get the government involved — and make denial of a home loan a racist offense — and you’ve got disaster….

…where the government’s concerned, they’re spending other people’s money, which might as well be Monopoly money…for many of our neighbors, it’s also Monopoly money, they’re the little dog, and come the end of the month they’re prayin’ that they pass “Go”…and figure we’re here to bail ‘em out if they instead land on Broadway, hotels abounding….

Puritan1648 on November 28, 2008 at 8:05 PM

Puritan1648 on November 28, 2008 at 8:05 PM

So you are telling me, that since you haven’t the discipline to control yourself, nobody should be allowed to have credit cards?

Or perhaps you want to license credit cards. Only those who can pass a govt test will be allowed to have them?

MarkTheGreat on November 28, 2008 at 8:18 PM

The world’s second oldest profession is whoring money.
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The banking industry pushed congress to make interest on home equity loans deductible, then pushed homeowners into borrowing against their equity.
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And now the chickens have come home.
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All dogs go to heaven most politicians go elsewhere.

esblowfeld on November 28, 2008 at 8:31 PM

The two main reasons why our economy is doomed for failure are:
1) America (and Americans) consumes more than it produces.
2) America (and Americans) borrows more than it saves.

Under these conditions, the American standard of living can only be sustained by selling off assets that we have accumulated in the past, and/or borrowing money with a promise to repay it in the future. Obviously this can not go on indefinitely, there will come a day of reckoning.

A fitting analogy would be, the prospect of surgery and subsequent chemotherapy for a cancer patient. Surgery and chemotherapy will ensure pain and suffering in the short term, but the patient will have an excellent chance of recovery. Postponing the surgical option, and improving the patients “quality of life” with painkillers, will certainly insure the patients death. If, we as a nation, do not choose the more painful option in the short term, we face almost certain catastrophic economic failure and possibly the end of America as we know it.

Two Concise Reasons Why We Face Certain Economic Doom

garyganu on November 28, 2008 at 10:23 PM

garyganu on November 28, 2008 at 10:23 PM

You are spot on and I agree! Excellent website, BTW!

Neocon Peg on November 29, 2008 at 12:16 AM

Oh, what nonsense. It was multiple Democrat elected, especially the “Black (racist) Caucus,” and those appointed to critical poositions that came close to destroying our economy. They just may do so.

rlwo2008 on November 29, 2008 at 12:33 AM

Learning a lesson implies that someone admits a mistake and then takes action to avoid future mistakes exactly like, or similar to, the initial mistake.

Unless I am mistaken, no one has admitted a mistake yet. This means that million of Americans will make this same mistake again.

No one that needs to has learned any lesson. I assure you of this.

watson007 on November 29, 2008 at 12:51 AM

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