I've been thinking for awhile now that maybe there isn't as much room to fall in our economy as there was 30 years ago.  Maybe there is a better economic safety net now than there was 30 years ago.

 

In a manufacturing economy, when people stope buying, sales fall, and workers get laid off. The feedback loop accelerates.  But we aren't the manufacturing economy that we were 30 years ago.  Today's feedback loop may be getting a lot of resistance. I suspect more people are employed by the government today, especially if you define gov't employment to include those sectors dependent on gov't spending - healthcare, education, social services, retirees, etc. Those jobs, while not 100% secure, are far less tied to the cutback in spending as those 1975 manufacturing jobs were.  We still need people to work nursing homes.

 

Think about what our Labor guru from Dayton has said about where the excess labor has gone in the past - first manufacturing, then clerical jobs, and now..?  Seems to me a lot of that ? now comes under government supported services.  And today construction is shifting to be more under this umbrella.

 

I guess my point is, the dreaded negative feedback loop of job losses & reduced spending may have a lot less room to run today than it did 30 years ago.  Maybe the economy can only fall so far now before all the government supported jobs puts a check on the drop.  Maybe the effects of an economic crisses of this magnatude will have a much shallower affect of the national economy than it would have 30 years ago.

 

Just some random thoughts.

 

I've been thinking for awhile now that maybe there isn't as much room to fall in our economy as there was 30 years ago.  Maybe there is a better economic safety net now than there was 30 years ago.

 

 

I think it's hilarious that the same paper (Cincy Enquirer) gives us constant updates on the recession and then publishes an article about King's Islands successful opening weekend? lol

 

I mean, we're in a recession, but we're being shown pictures of people running in droves to the roller coasters - trying to be first in line.

 

I wonder how the folks that lived during the Great Depression would've thought about this?

A lot of good thoughts. I am not sure the government part is as big as you might think, or as stable. While the FEDs may not be laying off, state and local government is slashing workers at a pretty fast rate. I am not sure the FEDs will be able to create enough jobs to cover the state and local government loses and still have room to absorb other industry loses as well.

I've been thinking for awhile now that maybe there isn't as much room to fall in our economy as there was 30 years ago.  Maybe there is a better economic safety net now than there was 30 years ago.

 

 

I think it's hilarious that the same paper (Cincy Enquirer) gives us constant updates on the recession and then publishes an article about King's Islands successful opening weekend? lol

 

I mean, we're in a recession, but we're being shown pictures of people running in droves to the roller coasters - trying to be first in line.

 

I wonder how the folks that lived during the Great Depression would've thought about this?

 

People may still be spending, but they are not spending as much. KI is a fairly cheap, local option for entertainment. People may be replacing the family summer vacation with KI passes, or Six Flags passes. Many local parks are betting that they can squeeze some of the remaining discretionary dollars out of the consumers wallets with significant new investments (KI Diamondback, Holiday World Pilgrams Plunge, etc...). I know the big parks are taking a significant hit at this time, Disney, Universal, Sea World all are showing significant drops in revenue and attendance. It will be interesting to see how the seasonal, local parks fair over the summer season.

 

I personally think they are going to do well this summer. If we get the next leg down in the economy this fall and winter, then the local parks may find things significantly tighter next summer.

If we are going to have anything like a repeat of the Great Depression, it is important to remember that we would be in 31 or so right now rather than 32 or 33. If you read the papers from the period, it is really with the Christmas of 31 that people started to get a sense that this wasn't just another recession. In early 32, you start seeing the first signs of hunger and foodlines growing, churches ramping up their response (or falling short because of the demand). The big bank failures came somewhat latter in the process as well.

 

I agree somewhat that the nature of a lot of the economy is that it is more resistant to boom and bust. Though it isn't all gov't as local gov'ts are slashing as rr noted (though a lot of that remains phantom budgeting and slots). The military budget remains far larger with many more men and women receiving regular paychecks that flow back through the economy. That is a base we definitely didn't have 70 years ago.

 

The 1870s still might be a model for what's going on. There was an article on that notion back in the fall.

For something to think about over the weekend, let me present this in another way...

 

I grew up in the '70s and it seemed that there was plenty of disposable income, provided you were not so unfortunate enough to lose your job.

 

Today, it seems like there is not a lot of disposable income for the typical household - everyday expenses take up a very high percent of the paycheck.

 

So, back in 1975, if you were concerned for your job, you could put the breaks on spending, and realy cut back, maybe 25-40%.  Today, if you are worried about your job, you put the breaks on spending, but maybe only cut back 5-10%.  So despite concerns, people are not able to cut back much.  Big ticket items are cut, definetly - cars, trips, etc, and this is what we are seeing.  But everyday life is not cut much- gas consumption, grocery bills, cell phones, etc. 

 

So despite American's concerns about losing their jobs, they just aren't able to cut back as much as they would like.  And not cutting back on spending means that fewer workers will lose their jobs as a result of the diminished feedback loop.  Yes, people in the auto, boating, travel, RE industries, yes.  But how many people will Time Warner lay off because of this slowdown?  How many people at Krogers will lose their jobs?  Yes, some retail will close, but how much? 

 

So outside of select industries, how many people will actually lose their jobs?  I can see a situation where a great number of employers scale back the current staff levels a small percent (5%), but hold steady at that.  This situation is not good if you are looking for a job, but keeping employment at 95% of previous levels still leaves a lot of income to be spent on the necessities of life, and a little left over for some entertainment (Kings Island, but avoid the concession stands).

 

As I once asked on this thread... how many Americans does it take to keep this country running (ie sustain everyday life for all of us)?  I think the answere is that a much higher percent are needed today than 30 years ago, and therefore, employment will not fall below that level.  And as such, overall GDP will not fall as far as I originally thought.

 

I can see a decade ahead of us where those with jobs keep muddeling along, and those without keep looking for work.

 

An entire decade?  What do they eat while they're looking?  It's a problem I've had in the past.

Cincinnatus,

 

I think we need to remember we are talking about a significant recession not a depression. So, showing a pic from a recession and then showing one from the depths of the great depression is like comparing apples to oranges (or more like an apple to a tire).

While the FEDs may not be laying off, state and local government is slashing workers at a pretty fast rate.

 

But all the monthly employment numbers that keep coming out still show state and local gov'ts as net hirers.  That may be ready to change, but so far I don't see local gov'ts across the nation cutting back.  Butler county wher you and I work, yes.  But the nation as a whole, it seems to be holding steady right now.

An entire decade?  What do they eat while they're looking?  It's a problem I've had in the past.

 

Move in with relatives?  Take minimum wage jobs just to earn money for food?  Work at a food place and eat on the job? 

 

Muddling through does not imply destitude.  It means getting by at a much reduced level.  I'd say eating would come before most other things.

For something to think about over the weekend, let me present this in another way...

 

I grew up in the '70s and it seemed that there was plenty of disposable income, provided you were not so unfortunate enough to lose your job.

 

Today, it seems like there is not a lot of disposable income for the typical household - everyday expenses take up a very high percent of the paycheck.

 

So, back in 1975, if you were concerned for your job, you could put the breaks on spending, and realy cut back, maybe 25-40%.  Today, if you are worried about your job, you put the breaks on spending, but maybe only cut back 5-10%.  So despite concerns, people are not able to cut back much.  Big ticket items are cut, definetly - cars, trips, etc, and this is what we are seeing.  But everyday life is not cut much- gas consumption, grocery bills, cell phones, etc. 

 

So despite American's concerns about losing their jobs, they just aren't able to cut back as much as they would like.  And not cutting back on spending means that fewer workers will lose their jobs as a result of the diminished feedback loop.  Yes, people in the auto, boating, travel, RE industries, yes.  But how many people will Time Warner lay off because of this slowdown?  How many people at Krogers will lose their jobs?  Yes, some retail will close, but how much? 

 

So outside of select industries, how many people will actually lose their jobs?  I can see a situation where a great number of employers scale back the current staff levels a small percent (5%), but hold steady at that.  This situation is not good if you are looking for a job, but keeping employment at 95% of previous levels still leaves a lot of income to be spent on the necessities of life, and a little left over for some entertainment (Kings Island, but avoid the concession stands).

 

As I once asked on this thread... how many Americans does it take to keep this country running (ie sustain everyday life for all of us)?  I think the answere is that a much higher percent are needed today than 30 years ago, and therefore, employment will not fall below that level.  And as such, overall GDP will not fall as far as I originally thought.

 

I can see a decade ahead of us where those with jobs keep muddeling along, and those without keep looking for work.

 

 

But people in the 70s had very differen spending patterns.  Most were not living on credit.  so decreasing your spending 25% was easier.  Folks lived within their means.  They only credit most had was a home.  folks saved then spent.  There werent as many ways to spend back then either.

While the FEDs may not be laying off, state and local government is slashing workers at a pretty fast rate.

 

But all the monthly employment numbers that keep coming out still show state and local gov'ts as net hirers. That may be ready to change, but so far I don't see local gov'ts across the nation cutting back. Butler county wher you and I work, yes. But the nation as a whole, it seems to be holding steady right now.

 

CincyDad,

I can tell you from job posting and many friends throughout the country that work in local government, cuts are happening all across the board (including layoffs). It may not be at the same levels as the manufacturing or construction industry but its building. I can't remember (its been a while), but we had a discussion on here about how the government collects data. I believe its was shown that they just factor in a certain amount of government jobs being created (as a given), weather or not it actually is happening. Maybe you remember that discussion a little better.

I think we need to remember we are talking about a significant recession not a depression. So, showing a pic from a recession and then showing one from the depths of the great depression is like comparing apples to oranges (or more like an apple to a tire).

 

Oh, I'm not comparing a recession to the depression. I'm showing the depression compared to the start of a season where parents and adults will spend millions on entertainment ... almost every kind of entertainment available to man. You're apples to oranges, or rather tires was right on the money, btw. ;) ... thank you.

Yea, I remember the discussion very well.  The Birth-Death model.

 

I was always a bit surprised by the reported growth in local gov't employment.  I figured they were just operating on a fiscal year, and still hiring until the end of their budget cycle.  I do expect to see that sector begin to shrink.

Also, the Kings Island point is just one of many. We are FAR from rock bottom. As someone that sees first-hand... folks are still being approved for loans and they're still buying houses... not because they're a temp or laid off, but because they're stable financially.

 

The media has taken this "recession" and ran with it.

I think we need to remember we are talking about a significant recession not a depression. So, showing a pic from a recession and then showing one from the depths of the great depression is like comparing apples to oranges (or more like an apple to a tire).

 

Oh, I'm not comparing a recession to the depression. I'm showing the depression compared to the start of a season where parents and adults will spend millions on entertainment ... almost every kind of entertainment available to man. You're apples to oranges, or rather tires was right on the money, btw. ;) ... thank you.

 

I am glad you agree on what we are talking about. You have come a long ways since we starting this discussion. :wink:

 

I think the real discussion is how our society was spending X amount on houses, cars, entertainment, etc... and now they only can spend 1/2 of X. That means a significant reduction in business for a lot of companies and a lot of jobs being lost. Thus, we have a deeping recession and its not done yet.

One of the biggest crushing blows of the Great Depression was when massive numbers of municipalities started defaulting on their debt. Part of the New Deal was shifting local gov't revenue away from property taxes - which is had been like 90% of local revenue going into Depression. First states and then in 60s the Feds started pushing money down to local gov'ts and more and more cities adopted earnings taxes to keep some money coming if folks didn't have enough to pay their property taxes. (Eric Monkkonen, Crisis in the Cities)

 

One of key differences that happened in the 80s is that our debt was shifted to the credit card and away from the store and often the particular item. How this shapes debt repayment and how folks manage their income is still unclear, but clearly has some effect.

For something to think about over the weekend, let me present this in another way...

 

I grew up in the '70s and it seemed that there was plenty of disposable income, provided you were not so unfortunate enough to lose your job.

 

Today, it seems like there is not a lot of disposable income for the typical household - everyday expenses take up a very high percent of the paycheck.

 

So, back in 1975, if you were concerned for your job, you could put the breaks on spending, and realy cut back, maybe 25-40%.  Today, if you are worried about your job, you put the breaks on spending, but maybe only cut back 5-10%.  So despite concerns, people are not able to cut back much.  Big ticket items are cut, definetly - cars, trips, etc, and this is what we are seeing.  But everyday life is not cut much- gas consumption, grocery bills, cell phones, etc. 

 

So despite American's concerns about losing their jobs, they just aren't able to cut back as much as they would like.  And not cutting back on spending means that fewer workers will lose their jobs as a result of the diminished feedback loop.  Yes, people in the auto, boating, travel, RE industries, yes.  But how many people will Time Warner lay off because of this slowdown?  How many people at Krogers will lose their jobs?  Yes, some retail will close, but how much?  

 

So outside of select industries, how many people will actually lose their jobs?  I can see a situation where a great number of employers scale back the current staff levels a small percent (5%), but hold steady at that.  This situation is not good if you are looking for a job, but keeping employment at 95% of previous levels still leaves a lot of income to be spent on the necessities of life, and a little left over for some entertainment (Kings Island, but avoid the concession stands).

 

As I once asked on this thread... how many Americans does it take to keep this country running (ie sustain everyday life for all of us)?  I think the answere is that a much higher percent are needed today than 30 years ago, and therefore, employment will not fall below that level.  And as such, overall GDP will not fall as far as I originally thought.

 

I can see a decade ahead of us where those with jobs keep muddeling along, and those without keep looking for work.

 

 

But people in the 70s had very differen spending patterns.  Most were not living on credit.  so decreasing your spending 25% was easier.  Folks lived within their means.  They only credit most had was a home.  folks saved then spent.  There werent as many ways to spend back then either.

 

MTS is 100% right. The big difference when I was growing up in the early 70s was that almost nobody had credit, and if you did, you maybe had one store charge like a JC Penney card and that was IT.  Ergo, if you did not have the money, YOU DID NOT BUY IT.  Our culture has completely changed because of credit.  People had more disposable income because they were more careful about spending since they didn't have to spend all their money paying off credit cards.  You had to save up to buy something.  That's why all the stores used to have layaway - you went in each month and made a payment and then after several months you finally got to take the clothes home.  It's just not like that now. 

 

 

For something to think about over the weekend, let me present this in another way...

 

I grew up in the '70s and it seemed that there was plenty of disposable income, provided you were not so unfortunate enough to lose your job.

 

Today, it seems like there is not a lot of disposable income for the typical household - everyday expenses take up a very high percent of the paycheck.

 

So, back in 1975, if you were concerned for your job, you could put the breaks on spending, and realy cut back, maybe 25-40%. Today, if you are worried about your job, you put the breaks on spending, but maybe only cut back 5-10%. So despite concerns, people are not able to cut back much. Big ticket items are cut, definetly - cars, trips, etc, and this is what we are seeing. But everyday life is not cut much- gas consumption, grocery bills, cell phones, etc.

 

So despite American's concerns about losing their jobs, they just aren't able to cut back as much as they would like. And not cutting back on spending means that fewer workers will lose their jobs as a result of the diminished feedback loop. Yes, people in the auto, boating, travel, RE industries, yes. But how many people will Time Warner lay off because of this slowdown? How many people at Krogers will lose their jobs? Yes, some retail will close, but how much?

 

So outside of select industries, how many people will actually lose their jobs? I can see a situation where a great number of employers scale back the current staff levels a small percent (5%), but hold steady at that. This situation is not good if you are looking for a job, but keeping employment at 95% of previous levels still leaves a lot of income to be spent on the necessities of life, and a little left over for some entertainment (Kings Island, but avoid the concession stands).

 

As I once asked on this thread... how many Americans does it take to keep this country running (ie sustain everyday life for all of us)? I think the answere is that a much higher percent are needed today than 30 years ago, and therefore, employment will not fall below that level. And as such, overall GDP will not fall as far as I originally thought.

 

I can see a decade ahead of us where those with jobs keep muddeling along, and those without keep looking for work.

 

 

But people in the 70s had very differen spending patterns. Most were not living on credit. so decreasing your spending 25% was easier. Folks lived within their means. They only credit most had was a home. folks saved then spent. There werent as many ways to spend back then either.

 

MTS is 100% right. The big difference when I was growing up in the early 70s was that almost nobody had credit, and if you did, you maybe had one store charge like a JC Penney card and that was IT. Ergo, if you did not have the money, YOU DID NOT BUY IT. Our culture has completely changed because of credit. People had more disposable income because they were more careful about spending since they didn't have to spend all their money paying off credit cards. You had to save up to buy something. That's why all the stores used to have layaway - you went in each month and made a payment and then after several months you finally got to take the clothes home. It's just not like that now.

 

 

 

I completely agree with this thought process! We stopped using our credit cards about 6 months ago.

 

 

 

For something to think about over the weekend, let me present this in another way...

 

I grew up in the '70s and it seemed that there was plenty of disposable income, provided you were not so unfortunate enough to lose your job.

 

Today, it seems like there is not a lot of disposable income for the typical household - everyday expenses take up a very high percent of the paycheck.

 

So, back in 1975, if you were concerned for your job, you could put the breaks on spending, and realy cut back, maybe 25-40%.  Today, if you are worried about your job, you put the breaks on spending, but maybe only cut back 5-10%.  So despite concerns, people are not able to cut back much.  Big ticket items are cut, definetly - cars, trips, etc, and this is what we are seeing.  But everyday life is not cut much- gas consumption, grocery bills, cell phones, etc. 

 

So despite American's concerns about losing their jobs, they just aren't able to cut back as much as they would like.  And not cutting back on spending means that fewer workers will lose their jobs as a result of the diminished feedback loop.  Yes, people in the auto, boating, travel, RE industries, yes.  But how many people will Time Warner lay off because of this slowdown?  How many people at Krogers will lose their jobs?  Yes, some retail will close, but how much? 

 

So outside of select industries, how many people will actually lose their jobs?  I can see a situation where a great number of employers scale back the current staff levels a small percent (5%), but hold steady at that.  This situation is not good if you are looking for a job, but keeping employment at 95% of previous levels still leaves a lot of income to be spent on the necessities of life, and a little left over for some entertainment (Kings Island, but avoid the concession stands).

 

As I once asked on this thread... how many Americans does it take to keep this country running (ie sustain everyday life for all of us)?  I think the answere is that a much higher percent are needed today than 30 years ago, and therefore, employment will not fall below that level.  And as such, overall GDP will not fall as far as I originally thought.

 

I can see a decade ahead of us where those with jobs keep muddeling along, and those without keep looking for work.

 

 

But people in the 70s had very differen spending patterns.  Most were not living on credit.  so decreasing your spending 25% was easier.  Folks lived within their means.  They only credit most had was a home.  folks saved then spent.  There werent as many ways to spend back then either.

 

MTS is 100% right. The big difference when I was growing up in the early 70s was that almost nobody had credit, and if you did, you maybe had one store charge like a JC Penney card and that was IT.  Ergo, if you did not have the money, YOU DID NOT BUY IT.  Our culture has completely changed because of credit.  People had more disposable income because they were more careful about spending since they didn't have to spend all their money paying off credit cards.  You had to save up to buy something.  That's why all the stores used to have layaway - you went in each month and made a payment and then after several months you finally got to take the clothes home.  It's just not like that now. 

 

 

Also in teh 70s, your credit card was in your husbands name.  So there was never any doubt as to the credit ones family had.  I don't think my mother had her on credit card until I graduated high school.  My father didn't know for years.

 

Layaway, most stores eliminated layaway when they built marketing partnerships with banks to run their credit card business.  In the past few months several retailers have brought pack layaway.

The data doesn't actually show that people weren't buying on credit in the 70s, in fact, once credit became a common way to buy in the 20s, it hasn't gone away. What did change is that folks used to have lines of credit with stores (even grocery stores) or on specific products - you financed your television rather than buying with revolving credit.

 

A fascinating data set is at: http://www.federalreserve.gov/releases/g19/hist/cc_hist_sa.html

That is outstanding consumer debt from 1943 to 2009.

To go along with that, a lot of layaway departments have closed. I do not think Wal-Mart has this feature available anymore.

There were also things like Christmas stamps (which I have a vague memory of from the early 80s, when inflation was threatening to undermine the ability to save money through the year). Basically, you bought ahead a certain amount of stamps that could be used on items for Christmas. Older folks can correct me on the details.

Look at all those "popular" states and cities.  I've said it before.  Those "new" cities that were growing at the end of the 90s are going to hurt the most.  Vegas, Miami, Charlotte, ATL, Raleigh, San Deigo, Phoenix, those Sunbelt cities don't look so hot now!

 

Texas, has shown some resilience outside unemployment.

 

The same thing happened in the recession in the early 1990s. When I lived in Geauga County east of Cleveland back then, we had some new neighbors from California who were escaping the poor economic conditions. It was a very unique experience since the previous recession, in the late-70s and early-80s, was the death knell for the Rust Belt's heavy industrial economy. For many industry-dependent places in the Midwest-Northeast like Gary, Flint, Youngstown, Scranton, Bethlehem or Lowell, they never recovered (except for Lowell, but it still bears many scars).

There were also things like Christmas stamps (which I have a vague memory of from the early 80s, when inflation was threatening to undermine the ability to save money through the year). Basically, you bought ahead a certain amount of stamps that could be used on items for Christmas. Older folks can correct me on the details.

 

Do you mean eagle stamps?  Or are christmas stamps a different beast?

They may have been related to eagle stamps, but as I recall they were more like inflation protected gift certificates. Banks may even have issued them.

I can vaguely remember S&H stamps.  Does that make me old?

 

And Christmas savings programs at banks were popular until the mid '80s.

I guess my thinking is more along the lines of those "Help.  I've fallen and I can't get back up" commercials.

 

I see the standard of living in the US taking a permanent shift down with this recession.  But I'm not so sure it's going to be that big a step down.  Yes, the economy still has room to drop, and a lot of possible future bad news has not been priced into the markets.  I still expect another leg down in the fall.

 

I can also see all the factors mentioned above as headwinds to growth, and I think that is where the next issue for our economy is.  Maybe, as a nation, we've fallen about as far as we are going to.

 

But like in those commercials, I don't see any help in getting back up.

I guess my thinking is more along the lines of those "Help. I've fallen and I can't get back up" commercials.

 

I see the standard of living in the US taking a permanent shift down with this recession. But I'm not so sure it's going to be that big a step down. Yes, the economy still has room to drop, and a lot of possible future bad news has not been priced into the markets. I still expect another leg down in the fall.

 

I can also see all the factors mentioned above as headwinds to growth, and I think that is where the next issue for our economy is. Maybe, as a nation, we've fallen about as far as we are going to.

 

But like in those commercials, I don't see any help in getting back up.

 

I have to say, we have been looking at a LOT of houses over the past few months and it is amazing to me to see what appears to be proof everywhere of so many people who just HAVE to be living above their means/via credit.  Nobody needs all the stuff these people seem to have and it's amazing how many people fill up their houses and garages with adult and kid "toys."  I can tell from other clues inside the house that the people are not just rich and living high on the hog.  I was behind some people in Target who bought like $200 in completely unnecessary junk this weekend and it just amazes me.  I think this kind of spending is going to have to end.  No more boats, dirt bikes, 3rd cars, wall after wall after wall of toys, etc.

I guess my thinking is more along the lines of those "Help.  I've fallen and I can't get back up" commercials.

 

I see the standard of living in the US taking a permanent shift down with this recession.  But I'm not so sure it's going to be that big a step down.  Yes, the economy still has room to drop, and a lot of possible future bad news has not been priced into the markets.  I still expect another leg down in the fall.

 

I can also see all the factors mentioned above as headwinds to growth, and I think that is where the next issue for our economy is.  Maybe, as a nation, we've fallen about as far as we are going to.

 

But like in those commercials, I don't see any help in getting back up.

 

I have to say, we have been looking at a LOT of houses over the past few months and it is amazing to me to see what appears to be proof everywhere of so many people who just HAVE to be living above their means/via credit.  Nobody needs all the stuff these people seem to have and it's amazing how many people fill up their houses and garages with adult and kid "toys."  I can tell from other clues inside the house that the people are not just rich and living high on the hog.  I was behind some people in Target who bought like $200 in completely unnecessary junk this weekend and it just amazes me.  I think this kind of spending is going to have to end.  No more boats, dirt bikes, 3rd cars, wall after wall after wall of toys, etc.

 

I was thinking the same thing.  This past week I've been helping my assistants find Condos.  They are both getting married and want to buy homes for their wives before "tying" the knot.

 

I was surprised to see so many people living in apartment outside of their means.  I mean apartments with high grade appliance and no furniture. 

 

We went to a two bedroom apartment building on the UWS, the people have lived there for two years and the only furniture they have is a bed, a dresser, two stoles and some stackable stuff.  They are "house poor".  Yet they want to start a family and move up to something larger.  :wtf: :wtf:  Their rate change and they cannot afford the mortgage and maintenence fee.

 

Your house is up on a "short sale" but you want to move up?  I just don't understand the thought process.

 

That is the equivalent of me saying I want my nextdoor neighbor to move so I can knock through the wall to make a one floor 6,400 Sq. Ft. aparment. 

I think this kind of spending is going to have to end.  No more boats, dirt bikes, 3rd cars, wall after wall after wall of toys, etc.

 

I agree that non-necessities purchased primarily thru credit are in for a big (permanent?) drop - we're already seeing this with autos,motorbikes, boats, and Las Vegas trips .  But will spending on necessities drop?  How much 'necessity' spending is financed thru credit, and how much is paid for out of paychecks?

 

If this country were to cut back to purchasing only basic necessities and a small amount of local entertainment, is there really any room left at this point for the economy to shrink much?  It certainly appears that the discretionay toy spending (including excess housing) has come to an end.  And it appears that construction that supports this (ie malls) is also coming to an end.  But the rest of society is still plugging along.

 

What percent of the US economy is/was repressented by items we now call 'toys'?  5% ?  If the toy spending goes, there goes 5% of the economy.  But we've already seen a 5% contraction. 

 

The US population has been growing around 1% per year for the past couple of decades.  And inflation has been running around 2% per year lately.  So the economy needs to grow 3% to stay even (needs to generate about 150k net new jobs each month). 

 

So if the economy flatlines, I guess that represents a net decrease of some 3% in real terms.  I can see that happening for much of the next 5 years.  I'm just not so sure we are going to see much more contraction in Nomimal GDP.

 

I agree that non-necessities purchased primarily thru credit are in for a big (permanent?) drop - we're already seeing this with autos,motorbikes, boats, and Las Vegas trips .  But will spending on necessities drop?  How much 'necessity' spending is financed thru credit, and how much is paid for out of paychecks?...What percent of the US economy is/was repressented by items we now call 'toys'?  5% ? 

 

The big problem is that I don't think a lot of people have ever had to really decide between what is a non-necessity and what isn't.  Yes, your daughter might be getting bigger and need new clothes, but you don't have to buy NEW clothes at a department store, you can buy used clothes at a garage sale or Goodwill.  Yes, you need to eat and drink, but POP is not a necessity.  Neither are Doritos.  Yes, entertainment is desirable, but buying new movies is NOT a necessity.  Nobody seems to be making those choices yet from the looks of the carts I see in stores.  Everyone is filling their carts up with things they don't really need.  Pop and doritos and pizza rolls and ice cream are not food necessities.  New clothes from Target are not necessities.

 

Edited to add: it is amazing to me to see all these articles on news websites about easy ways to cut your budget, like stop buying fresh flowers and cut back on your dry cleaning and give up the daily latte and quit getting mani/pedis.  I mean, I cannot imagine that kind of waste on a weekly/monthly basis even if I were filthy rich, and people have to be TOLD to give up buying fresh cut flowers and mani/pedis?  I have never even had a mani/pedi and we don't get anything dry cleaned.

I agree that non-necessities purchased primarily thru credit are in for a big (permanent?) drop - we're already seeing this with autos,motorbikes, boats, and Las Vegas trips .  But will spending on necessities drop?  How much 'necessity' spending is financed thru credit, and how much is paid for out of paychecks?...What percent of the US economy is/was repressented by items we now call 'toys'?  5% ? 

 

The big problem is that I don't think a lot of people have ever had to really decide between what is a non-necessity and what isn't.  Yes, your daughter might be getting bigger and need new clothes, but you don't have to buy NEW clothes at a department store, you can buy used clothes at a garage sale or Goodwill.  Yes, you need to eat and drink, but POP is not a necessity.  Neither are Doritos.  Yes, entertainment is desirable, but buying new movies is NOT a necessity.  Nobody seems to be making those choices yet from the looks of the carts I see in stores.  Everyone is filling their carts up with things they don't really need.  Pop and doritos and pizza rolls and ice cream are not food necessities.  New clothes from Target are not necessities.

 

Edited to add: it is amazing to me to see all these articles on news websites about easy ways to cut your budget, like stop buying fresh flowers and cut back on your dry cleaning and give up the daily latte and quit getting mani/pedis.  I mean, I cannot imagine that kind of waste on a weekly/monthly basis even if I were filthy rich, and people have to be TOLD to give up buying fresh cut flowers and mani/pedis?  I have never even had a mani/pedi and we don't get anything dry cleaned.

Honey, I'm not giving up my mani/pedi or waxing!  I don't care how bad the economy is!  I'm not trying to imitate chewbacca!  I'm very hairy to so me waxing is a necessity.  Although I stop short of the Manzilian.

   

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  I do agree that you need to decide what is best for your family and categorize what "is" and "is not" a necessity.  I think it' hard for you to examine someones cart and determine they are purchasing "overages" or "non necessities".  Maybe they do a once a month treat and this was it?

 

I have cut back on fresh cut flowers at home and in the office.  Now I have a blooming plant or orchid.  There are ways to cut.  I was really bad about things and pretty much just buy.  But even I, with no credit, children or outstanding loans can justify free spending the way I could just 5 years ago.

 

I've done some things that have been detrimental to my brother as I do things one way with the kids and when he say "no", they chime in with "well Uncle Skippy would get it for me or buy me this (or that)" and it has set a bad idea on how people really live.  My "favorite uncle" gifts have backfired.

I think the reason the feds inflated the bubble after 9/11 was that they had a sense that a fall was coming, but they hoped that the world could find another engine of growth before the U.S. ran out of money (China, India, Brazil, et al.), and the forces of globalization (downward pressure on labor, upward pressure on commodities) sent us into a long spiral of decline like the 1870s and 1880s.

If you go back to the period from say 97-2004, there were lots of discussion about how Europe and Japan needed to get their act together, that the world economy depended too much on the willingness of the American consumer to continue to consume. So they made money disgustingly cheap and trained a generation of Americans to solve their problems with spending on credit. And they prayed, well it didn't work. I don't really blame them per se, but the emperor does have no clothes.

I'm all for a less consumerist society, but I haven't seen anybody figure out where the job growth would come from to make up for the shrinking of the most consumerist parts of the economy.

I know what you're saying about not being able to tell what a person's situation is just from looking at the cart, but I don't necessarily agree. When the kids are running around and not paying any attention to what the parent is buying and acting like it's just a normal day, you can tell it's business as usual that they're dropping $200 at Target.  But what you can't tell is whether or not they can really "afford" it.  There are still lots of people doing just fine and not everyone is spending beyond their means. but the fact that national press/magazines have to put out articles to point out to people that giving up fresh flowers or a mani/pedi is a good way to save money to me means that people have completely lost touch with what is "necessary."  I had a discussion with a GF about this not long ago and she said she didn't want to give up her pedis or getting each new Coach purse when it comes out because they're "so nice."  She is working 2 jobs with an umployed husband and supporting 2 kids and is desperately trying to refi their house so they don't lose it.  If that were me, I wouldn't be spending my $ on pedis and coach purses, those are not necessities. 

I know what you're saying about not being able to tell what a person's situation is just from looking at the cart, but I don't necessarily agree. When the kids are running around and not paying any attention to what the parent is buying and acting like it's just a normal day, you can tell it's business as usual that they're dropping $200 at Target.  But what you can't tell is whether or not they can really "afford" it.  There are still lots of people doing just fine and not everyone is spending beyond their means. but the fact that national press/magazines have to put out articles to point out to people that giving up fresh flowers or a mani/pedi is a good way to save money to me means that people have completely lost touch with what is "necessary." 

OK...Now I see where you're coming from.  However, if I have the kids with me I've been guilty of that.  And someone might think i'm over indulging or living above my means.

 

I agree, so many kids have grown up with the "cribs" mentality.  Yet don't know how to balance their check book or read a bank statment to save their lives.  They see others doing something so they too have to do it.  TV, movie, product placement etc. has made us want, want, want even when some cannot afford it.

 

My assistants fiancee is prime example.  She currently lives in a huge studio and he live in a one bedroom.  They both have rent under $1k in Manhattan (she live in the village but has been there for 12 years, so she hasn't had a huge rent increase).

 

When they announced their engagement I suggested that they open a deposit only account that requires both of their signatures to make a withdrawl to save up enough for a down payment and moving expenses.  I gave both couples $2,400 to open the accounts.  Now they have a good chunk of change for a first home, but I had to continually beat into their heads, that for a first home you don't need this much space.

 

She likes my house so she asked me to help them find a house.  First thing out her mouth was "I want a house exactly like yours".  I just looked at her and said she was crazy and the both need to think & agree on a dollar amount they can realistic afford after speaking with the bank.  And to look at neighborhoods that was not desirable today.  These are two 30 year olds.

 

Why did I introduce them?  Kids, I tell ya!

 

  I had a discussion with a GF about this not long ago and she said she didn't want to give up her pedis or getting each new Coach purse when it comes out because they're "so nice."  She is working 2 jobs with an umployed husband and supporting 2 kids and is desperately trying to refi their house so they don't lose it.  If that were me, I wouldn't be spending my $ on pedis and coach purses, those are not necessities. 

 

Here, I COMPLETELY AGREE and understand what you're saying.

kids have grown up with the "cribs" mentality. Yet don't know how to balance their check book or read a bank statment to save their lives.

 

There's hope....

 

The weekend homework for my 5th grade son....

 

Enter a series of transactions into a bank statement (credits & debits like, writing checks, cash withdrawls, deposits, etc), then do a month-end balance reconciliation.

 

 

I think this may actually be just a economic correction. By the '90s, we in the U.S. had turned into a bunch of pigs. I think it peaked in 2005. Will living like we did in the '70s really be that bad?

By 8th grade they should be calculating credit ratings using the actual formulas our lives are controlled by... except that those formulas are still protected as trade secrets.  Modern financial arrangements should be taught early and often, in every school.  If we explain this stuff to young minds, maybe the kids will finally do something about "what do you mean they won't say what they penalize you for?"

I think this may actually be just a economic correction. By the '90s, we in the U.S. had turned into a bunch of pigs. I think it peaked in 2005. Will living like we did in the '70s really be that bad?

 

As long as we don't have to wear synthetic blends!

OK,  So some very good points were made about distinguishing wants and needs.

 

I'll break consumer spending into 3 categories:

 

Category 1:  Basic human needs (clothing, grocery store food) ,

Category 2:  General societial-level needs (cell phones, occasional eating out, some nice clothes),

Category 3: Outright toys - boats, dirtbikes, fancy cars, fancy clothes, excessive dining out, etc). 

 

certainly the last category is doomed in this economic downturn. The first category will probably tread water, even though the population is slowly growing.

 

The second category will take a hit, but I don't know home much.  I can see people trading down within the category (and we've seent his to a great deal in restaurant and retail sales already), but I'm not so sure the total dollar spending in category 2 is going to shrink that much.  I suspect unemployment would have to reach above 15% before category 2 would see a meaningful nominal dollar drop.  Yes, there may be some topline decrease in dollar spending, but I suspect a lot of what goes on will be trade-down.

I think the "keeping up with the Joneses" thing is WAY worse than I expected.  Having looked at an embarrassing number of houses now, I absolutely cannot BELIEVE the # of people who have either a pool or a trampoline in their backyard and it clearly seems influenced by what the neighbors have.  Literally, when one neighbor has a tramp, the next 4 or 5 neighbors around them seem to have one.  Same thing with a pool. Why do so many families need their own pool?  I seriously don't get that.  In a climate where, given the weather and people's schedules, you're maybe getting out there and using the pool 10 times a year, this just seems insane to me. When I was little, there was a NEIGHBORHOOD pool and everyone joined that; do they not do that anymore?  Are there no more neighborhood pool swim teams competing against each other?  You can't even SWIM in these big round bathtubs people have in their yards, they're not even 3 or 4 strokes wide. Nobody had their own pool when I was a kid unless they were exceedingly rich. And I knew one person who had a trampoline and nobody was ever allowed to go over to her house and use it because they were considered extremely dangerous - when did this change? I would say out of every 10 houses we have looked at, 9 either have their own pool or the next door or back door neighbor has a pool, it is mind-boggling.

^ The shift from neighborhood to private amenities started with TV replacing theaters.  I would love to see us reverse that trend... but as you've observed, it's pervasive.  It's also horribly inefficient at the societal level, for each neighborhood to have 15 pools instead of one.  But this drives purchasing, which enriches a number of people, a number which probably never included any US pool or trampouline manufacturers. 

I dunno about that theory, TV started replacing theater back when Uncle Milty first came on.  I do, however, think it's related to suburban sprawl and what people here have alluded to in that suburbanites would rather keep to themselves than mingle with neighbors.  Perhaps there just became too many neighborhoods for each of them to have a pool, or the existing pools became too far away as things got more sprawling?  It definitely seems like it has to be more of the "keep to yourself" thing than anything else because we have looked at several neighborhoods that are in actual developments where you have to pay an HOA fee which includes access to A POOL and yet many, many people still have their own pool.

 

Snarky aside: Maybe everyone is so fat now from driving their mini-vans and living on doritos and pop that they don't want anyone in the neighbhorhood to see them in their bathing suit.

I think the "keeping up with the Joneses" thing is WAY worse than I expected.  Having looked at an embarrassing number of houses now, I absolutely cannot BELIEVE the # of people who have either a pool or a trampoline in their backyard and it clearly seems influenced by what the neighbors have.  Literally, when one neighbor has a tramp, the next 4 or 5 neighbors around them seem to have one.  Same thing with a pool. Why do so many families need their own pool?  I seriously don't get that.  In a climate where, given the weather and people's schedules, you're maybe getting out there and using the pool 10 times a year, this just seems insane to me. When I was little, there was a NEIGHBORHOOD pool and everyone joined that; do they not do that anymore?  Are there no more neighborhood pool swim teams competing against each other?  You can't even SWIM in these big round bathtubs people have in their yards, they're not even 3 or 4 strokes wide. Nobody had their own pool when I was a kid unless they were exceedingly rich. And I knew one person who had a trampoline and nobody was ever allowed to go over to her house and use it because they were considered extremely dangerous - when did this change? I would say out of every 10 houses we have looked at, 9 either have their own pool or the next door or back door neighbor has a pool, it is mind-boggling.

 

Now you sound just like my dad.  We didn't have a pool and my father told us the "oh when I was a kid we had to walk 20 miles to forest hills....blah, blah, blah" and would finish with "why should I install a pool, when 90% of the people within 10 blocks of our house has a pool.  Nor can you use it year round!    I do not want all you're little friends running through my house, tearing sh*t up!  Go to someone else house and be there problem!  If you don't go to your friends house, go to your cousins or Thorton or Purvis parks!  Ya'll better not ask for a pool again or you'll regret it!!"

 

I was so hurt!  I was so mad at him especially since I can see our neighbors pool from our hallway steps.

 

He compromised and bought us a damn "slip-n-slide"  ::)

 

Now, as an adult, I don't understand why people need pools, when they are going to have to pay via taxes to maintain the community pools, parks, etc.

I dunno about that theory, TV started replacing theater back when Uncle Milty first came on.  I do, however, think it's related to suburban sprawl and what people here have alluded to in that suburbanites would rather keep to themselves than mingle with neighbors.  Perhaps there just became too many neighborhoods for each of them to have a pool, or the existing pools became too far away as things got more sprawling?  It definitely seems like it has to be more of the "keep to yourself" thing than anything else because we have looked at several neighborhoods that are in actual developments where you have to pay an HOA fee which includes access to A POOL and yet many, many people still have their own pool.

 

Snarky aside: Maybe everyone is so fat now from driving their mini-vans and living on doritos and pop that they don't want anyone in the neighbhorhood to see them in their bathing suit.

 

I think you're right on all points.  Re TV I meant way back in the day, as soon as TV came out.  That was the beginning of the end of a lot of things.  TV may have been the primary motor of sprawl all along, and sprawl may have been the primary motor of our economic crash... everyone has to have their own personal set of what were once neighborhood-level amenities.  Even if all those new personal amenities were produced at a factory nearby, which they weren't, this may not ever have been a sustainable system.

Now you sound just like my dad.

 

I know! I'm getting old, clearly. But seriously, your Dad was right and you see it now yourself.  For whatever reason, the generation that are parents now don't seem to have that "check" in place.  Whatever they want, that's what they get.

Now you sound just like my dad. 

 

I know! I'm getting old, clearly. But seriously, your Dad was right and you see it now yourself.  For whatever reason, the generation that are parents now don't seem to have that "check" in place.  Whatever they want, that's what they get.

 

Oh no.  I wanted a damn pool.  I wanted to have pool parties!  Even my mother admited she wanted a pool, but my father wasn't hearing it!  I don't think he got the hint, or ignored her, when she would sun bath on the lawn chairs.  I have to admit, she looked stupid out there.

 

So we ended up with a 5' round fish pond (thats now covered) and a damn slip-n-slide!  As you can see, I'm still bitter!  :whip:  :whip:

Clearly the source of all your troubles!