"The American consumer recognizes they have to save and trade down. It's a permanent condition. Trade down is here forever."
Howard Davidowitz, retail industry consultant, May 2009
May 17, 2009
Is the American consumer taking a break, or dead forever? Is "trade-down" permanent? And if the US consumer is dead, who'll pick up the slack?
"The American consumer recognizes they have to save and trade down. It's a permanent condition. Trade down is here forever."
Howard Davidowitz, retail industry consultant, May 2009
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23 comments:
and down
and down
and down
Yeah, it's for real.
Simply put, you cannot consume more than you produce forever. Math is math and we have finally found the peak point of our level of consumer debt serviceability. Our gov'ts are getting ready to find theirs. When you base an economy of an unsustainable level of debt, expect periods of contraction. It is time to pay the piper for the past 20-30 years of overspending.
The endgame of globalization as demonstrated with simple algebra: [(China GDP per capita $6,000 x 1,338,612,968) + (US GDP per capita $47,000 x 307,212,123)] / (1,338,612,968 + 307,212,123) = $13,653
Population and GDP per capita (purchasing power parity) from CIA World Factbook
For 3 month now, China sold more new cars than the US. We finally managed to run off one of our last manufacturing industries, automobiles. Actually they mostly did it to themselves due to incompetence and the UAW. There're not too many things left that we can manufacture and trade to the rest of the world. They're on to our money printing scheme, so US treasuries are not that well received any longer. We still have pharma, air planes and agriculture but I doubt it will be enough to sustain our current living standard.
Especially resources like oil or copper will be increasingly difficult to obtain. Too bad the FED can't print those.
For 20 years, Americans consumed more than they produced. The tab is coming due and we have two options to pay it. 1) We can work really hard and after a period of general austerity, repay the world what we owe. 2) We let Ben Bernanke and Tim Geithner use our currency's reserve status (for the last time), and print a shitload of money to painlessly "pay" our creditors what we owe them.
Hmmm, I wonder which path we'll take?
One word:
Americano = Pig At The Trough
What a nation !. Buy, eat, consume, fart, complain...
And don't forget "Loud Mouth".
I remember when Americans were called citizens, not comsumers. The advertising machines of America, the banks, and the government did this to us. And yes, "consumerism" is dead forever.
Years of expanding credit based on house prices always going up, along with the beginning of the computer age, has reached its limit. Even if Silicon Valley did invent something new, it wouldnt be manufactured here in Calif. Without jobs people won't by non-necessity items.
Well, the bright side is that we have had the longest expansion in history (1975-2007) including throwing in a few recessions. Our government is powerless to get us out of this mess. We have overproduced and over extended to capacity. Debt can no longer be sold as an "asset". It's that simple.
I do believe we will have to go back on the gold standard. It's the only way I see us getting out of this mess.
Down the old crapper we go until then.
America is DEAD.
Spiraling down the bowl.
That 'sucking sound' wasn't the Mexico border/NAFTA or a late night congressional blow-job rondevous in a pay toilet, or Geithner, It was Your Future being stolen from you and sqaundered by you as well.
Enjoy the HELOC, Stainless, Granite and 6%. Riots, death and chaos Up Next.
Summer of Rage '09. Get It ON!
AMERICA IS DETROIT.
AMERICA IS DEAD.
This is the collapse of American Empire in motion. We are going back to the basics, food, shelter and clothing. In other words, survival mode.
Joe M.
With the baby boomers moving into retirement the consumer spending of this population bubble will decline. Boomers will also vote themselves more government benifits to be paid by younger workers.
As the percent of working population delcines the standard of living will also decline along with consumer spending.
America's peak has come and gone.
It will be be a long slow decline for most Americans with what is left of the "middle class" melting away and wealth distribution becoming more "historically correct".
America (and the "American Dream") was an economic aberration as throughout history the 90/10 rule has been more the norm. That is, 90% of the people are essentially peasants while just 10% of the people are wealthy.
90/10 appears to be the "economic equilibrium" for humanity.
With massive (and still spreading) unemployment, you can write the consumer off for a long time.
I love David Davidowitz. He is one of the heroes. He has been spot on.
look at you all, already predicting america's collapse. that's it. give up.
bunch of sniveling pussies.
i'm not giving up. i'm not going to riot either. i'm going back to work, back to basics, back to humility.
i'm going to vote in every election. save my money. live within my means. but i'm not giving up.
go see how 90% of the world lives and then ask me again why i'm not ready to quit.
Anon 9:09 pm
I would have to agree with a lot of what you said.
I'm HIT!!!
Last night, I was in a well-known bar joint in downtown Alexandria, VA. I asked the owner (a friend for many years) on how his business was doing in this downturn. His answer didn't surprise me, but I was a bit shocked! Here it is, verbatim:
"A few years ago, customers used to flash their credit cards the minute they sat on their stools and open a tab. Many used to sign their bills without even verifying what was on it. Now, there are so many people who come in, order a drink--usually a cheap local beer--and from time to time go out to their car, take a shot from the drink they bought from the liquor store, and then come back to nurse their beer at my bar, a sip at a time."
"But the bar is packed," I said.
"Yeah! You’re right, but my bar tenders aren't busy anymore. I already let some of them go, and I still am not seeing any real activity with the ones I kept. It's a very bad time for them and for me."
Remember, I am not talking here about Detroit or SoCal or Vegas or Miami. This is the Washington area which usually doesn't suffer as much in a downturn as many other parts of the country do. And I was just passing by!
Amusing read about numbskull NYT editor (economics editor no less) bought $460K house on about 55K effective salary after support - liar loan of course. His solution to subsequent insolvency: stop paying your mortgage and enjoy the good times.
http://tinyurl.com/q8cwcm
Idiot sheeple consumers are doomed. Standard of living will fall off a cliff. Empty McMansions will be home to vagrants and stray dogs.
We'll trade down, until the next housing(?) boom.
People are waiting for house prices to hit bottom.
There is a lot of money that is looking for a long-term investment place, other than the stock market.
House prices will overshoot on the down side (undershoot) and housing investments will be a good buy.
The Government has done all it can to stop the downward slide of real estate and the economy. This has helped by making the recession less painful (in my opinion), but the Government’s actions are making the slide take longer. I would think that a slower, longer slide would have less of an undershoot, but real estate will become the best place for your money.
Of course there will be another real estate (and economy) boom/bust cycle.
Dead? No.
Long term slide down? Yes.
Who will pick up the slack?
I'd say most likely Asians, those who are getting all the "American" jobs. They're "partying like 1999" in Asia.
Asians will never make as much as Americans use to. But then again, they don't have to for record multinational corporation profits. Margins might need to be slimmer for say, Proctor & Gamble products in the Asian markets, but heck, there's 1.1 billion Indians buying them now and 1.2 billion Chinese buying them too. Who needs a paltry 310 million consumers in the USA anymore? As far as multi nationals are concerned, "Let Americans eat cake!" There are better markets to be developed and plucked.
Multi nationals win. You (the Americans), loose. Thanks for playing globalism.
Buh buh buh if recession is over, why would the consumer be taking a break?
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