Wednesday, June 22, 2011

The Death of Demand: The Post-Consumer Debt Economy

http://www.oftwominds.com/blogjune11/post-consumer-economy6-11.html
Posted by Gaucho Greg at June 22, 2011
Labels: ,

3 comments:

  1. AnonymousJune 28, 2011 at 2:46 PM

    It's as simple as this: the U.S. economy is mature and rapidly losing steam. And economists and politicians must get their collective minds around that fact. This doesn't mean we are doomed. But it does mean that sustained GDP growth of 3 percent is pure folly. Can US GDP grow at 3 percent in a given quarter or even year. Certainly it can. But it will never ever grow at 3 percent - or even 2 percent - for an entire decade.

    Let's review:

    Average rates of growth for US Real GDP by decade:

    1940s: 5.99%
    1950s: 4.17%
    1960s: 4.44%
    1970s: 3.26%
    1980s: 3.05%
    1990s: 3.20%
    2000s: 1.82%

    The rate of US GDP growth peaked in the 1960s! And has been trending down ever since. The minor exception was the 1990s when Personal Consumption Expenditures (PCEs) were driven by a) increased access to goods in the form of mind-numbing retail expansion; and b) consumer individuation - a cultural shift that supported the move toward individually-owned products (my room, my car, my phone, etc.). It was the PCEs on steroids period which drove the slight up-tick in overall Real GDP for the 1990s.

    The fact is that the US economy today is a 1% economy. That's it. Anyone who thinks that US GDP will grow at 2 percent or more for the decade 2010-2019 is delusional. I will wager $1 million with anyone who is willing to bet that the US economy will grow at 2 percent or more for the current decade. It will not.

    Tom Osenton
    Author of
    The Death of Demand

    ReplyDelete
  2. Gaucho Greg June 28, 2011 at 5:41 PM

    Anonymous, agreed, I wouldn't take the other side of that bet, but the reasons are multivariate, not just from a consumption. Consumption is a big portion of it, since our economy is now 70% consumer-driven, as our industrial capacity has been gutted. I would say the biggest reason is the accumulation of compounding debt. That will be a constant weight on future growth. There are also many other reasons on why an aging empire experiences decelerated growth: demographics, increased complexity, diminishing returns, complacency, over-reaching military, loss of personal freedoms, increased entitlement, currency debasement, taxation, regulation, etc. The ONLY possibility that we right this ship is if we have some literally earth-changing technology that would provide us with a temporary bump in economic growth, but even that event won't change the downward trend, so that possibility would only delay, not prevent the inevitable collapse of the empire.

    ReplyDelete
  3. Gaucho Greg June 28, 2011 at 5:44 PM

    Not to mention the GDP growth calculation is flawed, as well as misguided. You break a window that costs $10, I replace it for $11, and now you have $21 of GDP, yet nothing has really changed.

    ReplyDelete

Subscribe to: Post Comments (Atom)