July 26, 2014

Asceticism — The Cure for Consumerism

A report from Wells Fargo Securities shows a "record drop" in consumer credit this summer. "Despite the cash-for-clunkers program starting in the last week of July, nonrevolving credit fell at a staggering 11.7 percent annualized pace," analyst Yasmine Kamaruddin wrote. Indeed, much of the decline was attributed to a spike in charge offs, which points to the ongoing, widespread distress in economic life. But here's the thing, and it's very simple. The reason that major sectors of the economy such as autos and housing have suffered historic declines -- indeed in some cases been on the verge of collapse -- is that consumers suddenly stopped buying what companies were selling. Certainly, much of this pull back can be explained by growing joblessness and fear about the future. But I suspect that there's also a cultural shift going on, which may continue long after the economy bounces back. In the future, we may see less consumption, especially for things like the McMansions and … [Read more...]