The New Fru and Fundamental Change

As part of my job for the Boomer Project, I survey the media and blogs for emerging trends. One unmistakable trajectory is the increased commentary on what EMR and I would call the “end of the era of mass overconsumption.” Others have given catchier names to the phenomenon, but it all amounts to the same thing: The era of unsustainable, debt-fueled consumption in the American economy is over. In contrast to the past two recessions, consumer spending will not rebound stronger than ever. Consumers are fundamentally re-evaluating the idea that accumulating more stuff is the path to happiness.

Matt Thornhill, a principal of the Boomer Project, sees the rise of what he has labelled “responsible consumerism” and, alternatively, the “new fru” (for new frugality). Personally, I find the second term more memorable. Responsible consumerism sounds like more people reading Consumer Reports. New Fru sounds like people embracing frugality as a positive virtue, which is, in fact, what I think more and more people are doing.

As Matt elaborates the concept in a Times-Dispatch op-ed piece, “Age of Responsible Consumerism Begins,” the spreading rejection of mindless consumption will persist beyond the cyclical tightening of credit. Writes Matt:

We saw this seismic shift coming a generation away. Members of both the G.I. and Silent generations, those now ages 63 and older, led the way by reducing their own consumption of goods and services as they grew older. Their desires shifted as they reached 50 and then 60: fewer material goods, more enriching experiences. Fast on their heels comes the largest, wealthiest, and most important demographic group America has even seen. Boomers, raised in front of television sets, a target for marketers from age 5 upward, are now reaching 60 at the rate of one every eight seconds.

That’s right. The generation that put the mass into consumption is now at the stage of life where people naturally shift focus from the material to the ethereal. What’s fascinating (or worrisome, if you’re in a retail or consumer-products business) is that the impact of this shift on America’s consumption-driven economy is just beginning.

But wait, there’s more: This shift away from spending by our largest demographic group coincides with a larger societal trend toward sustainability. Consumers of all ages are thinking more about the environmental impact of their purchase behavior and consumption patterns. In a national study we conducted among all adults in late summer, before the economic meltdown, 80 percent of all consumers told us they think or act in a “green,” or environmentally responsible fashion. Green is mainstream, and here to stay. Today’s consumers want to be responsible in their consumption. They crave sustainability, not planned obsolescence. They focus increasingly on “needs” and not “wants.”

Arguably the most profound shift in American values since the 1960s, the New Fru will lay the groundwork for Fundamental Change. Now, think through the implications. If consumers become more parsimonious, finding happiness in life from sources other than the accumulation of stuff, the long-term decline in consumer spending will send ripples — tidal waves, more likely — across the economy and the governance system built upon it. Here in Virginia, we need to prepare ourselves for several foreseeable consequences:
  • As the retail sector shrinks, there will be fewer retail jobs — an entry point for many Virginians into the workforce.
  • As retail sales shrivel, so will revenues from the sales tax. Government services that depend upon the sales tax for funding will be more fiscally challenged than services that rely upon, say, the income tax for a funding stream.
  • As retail chains contract, demand for retial space in malls and shopping centers will evaporate. Vacancies will rise. Investment in retail development and re-development will plummet. That, in turn, will hurt municipalities that depend upon their commercial property tax base for revenue.

These changes are bearing down on us like a freight train. There is no wishing them away. Governance practitioners have no excuse for getting caught off guard.

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33 responses to “The New Fru and Fundamental Change”

  1. Larry G Avatar

    I’m probably going to come across sounding like Ray but I think that disposable/discretionary income is related to consumption.

    Call me a skeptic but less discretionary income does not mean NO discretionary income – just less.

    So people will still spend on stuff perhaps with less available money to spend but whatever they have available – some of it likely will be spent – and some of it perhaps saved but I’m pretty skeptical that people, in general are going to jump the tracks and start diverting all of their discretionary income into savings.

    The part I’d certainly agree with is that we may well have less disposable income – as the influence world economics and sustainability influence this but it’s not a situation IMHO where we go from too much – to none but rather … less

    and it’s not a situation where we go from not saving a certain percentage of our disposable income to saving much more and spending much less.

  2. One place to watch spending change- American universities. While American society may be dominated (as always) by Boomer watching, the Generation Y/Boomlets or whatever the hell you want to call the young generation wave is cresting through college just as this economic ‘downturn’ is taking place. American university administrations have fallen all over themselves in a competitive arms race for more luxury dorms, rec centers, and all other sorts of amenities. Just look at Trani’s VCU, which has taken over most of Richmond. What’s going to happen now that more parents can’t afford the four year postponement of adulthood and realize that community college offers more efficiency and value? What’s going to happen now that the demographic wave is passing and immigration is slowing at the same time that government budget cuts are hitting? Personally, I hope that college and university presidents embrace sustainability and realign their mission back towards real academics.

  3. E M Risse Avatar
    E M Risse

    Jim Great Post.

    Lets add New Fru to the GLOSSARY. (An update on the way soon.)


  4. Groveton Avatar

    The decline in “consme at all costs” behavior is a ntural consequence of the Baby Boomers getting older. As Jim correctly notes, prior generations cut back on their spending as they got older too. However, the two bigger points are the increase in life expectancy and the phenominal shift in wealth from the young to the old. What does this all mean? It means that the aging Baby Boomers control a vastly disproportionate amount of the nation’s wealth. And they are living longer, dying later and either spending their fortunes on health care or delaying the inheritance to younger people. Finally, as Jim says, they are buying less thusly conserving more of their fortune and cutting off retail oriented jobs and taxes. But the big news is the inter-generational wealth transfer, not the slowdown in consumption.

    The US government cannot operate (as it has operated) in this environment. The money is running out. Not only sales taxes but income taxes are threatened. As the Boomers age they also retire. Their income comes from capital gains, dividends and interest, tax free municipal bond interest and spending down their cash reserves. There is little “ordinary income” in this equation. So, what’s the government going to do? Tax assets, that’s what. The Republicans out there can cry me a river over reduced government spending – but that’s what you’ll be doing – crying a river. The entitlement programs are well guarded by a phalanx of special interest commandos. No, the answer will be to tax assets. National real estate etaxes, higher death taxes, maybe even a tax on the balances in 401k’s and Keoughs. When this happens, all those Baby Boomers who thought they were clever by cutting back on consumption will wish they bought those iPods, expresso makers and other jimcracks when they had the chance.

  5. Anonymous Avatar

    I read the Thornhill piece and was underwhelmed. I am not convinced there will be a major drop in mass consumption, a drop of some temporary consequence, perhaps, but where is the evidence that a major on is in the offing? Thornhill did not make a convincing case. Even with market-related cuts in 401 (k)s, etc., there will be a recovery, a lot of that wealth will return and so will spending habits that still will be disproportionately higher than those of previous generations.

    This sounds like so much wishful thinking among Risseans.

    Peter Galuszka

  6. Anonymous Avatar

    If the money is out there, then it will be spent, eventually. Whether it is spent on conspicuous, wasteful, or frivilous consumption is a metter of opinion.

    But Groveton is right, we can expect the mix of taxes to change, and the more we shift to taxing of assets, the more you will hear about property rights.

    With regard to green conspicuous consumption, if you want to have a few good laughs, just watch the green channel programs on new homes or home decoration: hundreds of products being promoted as “green” with no reference to price, let alone actual green efficiency of these products.

    There is hope though, William McDonough is a Virginia Architect who designs homes specifically so that they can eventually be dismantled and recycled. They are also energy efficdient while in use.

    Maybe the big three automakers could learn something from him.


  7. Anonymous Avatar

    Our eonomy has been growing at 3% and the Chinese economy has been growing at 9%: three times as fast as ours. If we manage to reduce our consumption and our growth slows to one percent and theirs slows to five percent, then they will be gorwing five tims aqs fast.

    If that happens the Chinese economy will eclipse ours within ten years.

    Security and defense issues aside, what do you suppose will happen to all the reswources we saved when the Chiese can afford to buy them and we cannot?


  8. Larry G Avatar

    re: spending on frivolous “green”

    as opposed to spending on frivolous “generic” stuff?

    …as in a lot of folks actually sit down and compute the cost-benefit of stuff like 32inch LCD TVs or steam dishwashers, etc?

    ..One persons view of a “good” use their money is different from the next guys.

    ..Some might think spending on GREEN stuff is good while others might think that a new Kabota tractor is a “good” ‘investment’ of their money while others will think that trading in a 15mpg suv for a 24mpg suv is a “good” thing with a “green” dividend.

    My point..”green” is neither here nor there.. in the bigger scheme of spending on stuff… just another choice…

  9. Anonymous Avatar

    Groveton is both right and wrong about changes in consumption. I think he’s correct in that, as people age, they tend to consume less of traditional items. But I think he misses the tie between personal and government consumption.

    General good times in the US economy makes the typical citizen more receptive to government spending, which is generally redistributive in nature (not always from wealthy to poor), IMO. But when times get tougher, especially on a longer-term basis, I think people will question more strongly why, how and how much government spends. I just don’t believe that typical citizens will accept a situation where they perceive themselves unable to consume or otherwise satisfy their needs while the government goes on spending.

    My argument is not necessarily aimed at middle class hostility towards programs for the poor. I think that, at least today, there will be more middle class hostility towards programs that feel big business and big government. But as time goes on if the general economic situation does not improve, the level of hostility will increase.


  10. Anonymous Avatar

    Don’t confuswe “frivolous” with ungreen. The first is a matter of opinion, but the second can be measured.

    You have achoice of two frivolous items, and one is more “green” than another. How do you decide?

    My ususal rule is that if it costs less, thenthere are less resource involed and it is more green. If the item uses energy or it is a capital item then it is more comkplcated, but my7 rule holds, after you calculate the time value of money.

    I recently compaqred hot water heqaters: the generic one costs $10 more to run, but the green model cost $200 more! Assume the generic one is built in India or China where the workers use a tenth of the resources to live on ans we do. And mayber the green one isw manufactured in Ohio, where the pollution is more likely to affect Chesapeake Bay.

    Then there is th matter of wher YOUR money comes from. If you have an ungreen job,then your comapny will emit more pollution while you earnthat extra $200 dollars, than if you were say, an organic farmer.

    We can measure greenness, frivolous or not, but we don’t have the full information: say the energy saver appliance has a lot more embedded energy, and that accounts for the higher price. How would you know?

    So,I just assume that higher price implies more resources used. It isn’t perfect, but it works more often than not.

  11. Anonymous Avatar

    Cant really organize my comments so random away

    Ugh I hate the numbers game. Well all of us in generation Y know Social Security is a zero sum game there is nothing we can do about it. We just don’t have the votes.

    To Jim et all the economic solution to me screams healthcare. All of these older people :-p will need more and more of it. Thats the route Maryland took instead of pure tech they might have been smarter over all. People always talk about the teacher shortage but the nurse shortage is a much bigger issue. That ties into the college question. Start setting up nursing departments en masse. I do agree with the larger issue higher education spending has been going up way too fast for too long. The baby boomlet is just about over and numbers should be slowing (although still increasing) and budgets should be reduced to reflect this or taxpayers should start revolting.

    Happy New Year from your favorite Y generation commenter


  12. Groveton Avatar

    As usual, an interesting comment from TMT. Bad times = hostility toward government and government spending. Maybe so. As they say, “It takes a Carter to create a Regan”. Maybe it takes a Bush to create an Obama. Or an Obama to create a ….

  13. Anonymous Avatar

    So long as this is still a democracy, TMTs nose counting is off base.

    The majority, by a wide margin are getting further and further behind.

    They will vote for those who promise to shovel money their way.

    There is nothing those with money can do, their greed has made them a minority, a very small minority.

    Votes will trump dollars until the democracy goes away.

  14. Anonymous Avatar

    6:25 There isn’t enough people with “money” to fund all of the spending. Moreover, those with really big money generally are able to protect theirs — at least relative to those who are just well-off. Sooner or later, the spenders start taxing those who don’t see themselves as “rich.”

    I think Groveton’s last post said it well — in politics, success breeds downfall.


  15. Anonymous Avatar

    Taxes always increase until the revolution.

    Therefor those in favor of fundamental change should favor higher taxes.


  16. Ray Hyde Avatar

    On the one hand a slump is caused by insufficient spending. No amount of fruality or conservation will fix that. We either need more spending (and more consumption) or we slump forever.

    On the other hand a slump means that some people are unemployed. It is irrational to have needs go unmet while there are people willing to work to meet them.

    If Obama and company play this properly, there is a chance to get SOME environmental needs (and other ones) met at relatively low cost. We just need to understand the difference between “make work” and accelerating work we will eventually do anyway.

    We need a good economy to have a good environment (and a good defense system). We had best not abuse any one of the three.


  17. Jim Bacon Avatar
    Jim Bacon

    Groveton, You made a very good point about the impact of Boomers moving out of their peak earning years into retirement — they’ll be making less income, and the amount they pay in income taxes will decline. Because their numbers are so much larger than the succeeding generation, Gen X, the impact on income tax collection will be significant. I haven’t heard anyone factor that into their calculations about the long-term financial viability of the tax system, but it should make people afraid… very afraid.

  18. Larry G Avatar

    In terms of government spending.

    First recognize that taxes do not go into a black hole forever removed from the economy.

    When your taxes go to pay for a “good defense” – the government is paying salaries and buying humvees and MREs – both of which are built by real people getting real salaries – your taxes.

    The grand fru fru example of the above is Virginia.

    Between NoVa and HR/TW – Virginia is King of the Federal TAX economy.

    Virtually all of those vaunted “high tech” companies in NoVa are in one shape or another providing stuff for the Feds…

    And all those cars clogging the tunnels down in HR/TW have a high probability of having something to do with something the Navy pay money for to float.

    So.. Ray… how do you know if something is for a “good” purpose?

    If Obama decided that instead of spending money for 100,000 humvees a year, he might spend money for 80,000 humvees and 20,000 wind turbines – what would be the difference?

    If you convert a humvee factory in Toledo to a wind turbine factory – how is that a “waste” of tax dollars?

  19. Larry G Avatar

    re: the new Fru Fru and fundamental change and “bad” consumption…

    Let’s take those factory workers in Toledo that used to make Humvees but now they make wind turbines…..

    they all get older… and now a good portion of the workforce has had their kids and their off to their own lives and the workers and spouses are staring at what to do with their newfound source of dollars that no longer is being spent on clothes, ipods and chemistry books….

    so.. all of a sudden… they’re gonna say… heckfire… we don’t need no more “stuff”…. let’s stop consuming… except only for our basic needs… food and shelter and medical care – yadda yadda…

    now.. ya’ll tell me again.. what is … FUNDAMENTALLY different with their mindset nowdays that it used to be….

    I’ve heard a few of them say… things like… “we might need to work a few years longer since our 401K took a hit” …. or ” we won’t get a new car next year as originally planned”… or… “I guess we won’t get that beach house after all”…

    the bigger question – if folks have discretionary income – whether it is now or 20 years ago… help me understand what has changed so that folks do very different things with discretionary income than they used to….

  20. Jim Bacon Avatar
    Jim Bacon

    Peter, You are right to ask for evidence that a major shift in consumption is coming. Honestly, it is too early to tell yet whether any changes are transitory (related to the economic cycle) or reflective of a long-term shift in values. It would probably be appropriate to consider Matt Thornhill’s forecast as a hypothesis, to be confirmed or falsified by the economic evidence.

    However, there are solid reasons for suggesting that consumption patterns will shift radically.

    First, financial institutions have been humbled by financial debacle they helped create. They are rapidly deleveraging, which means that we will never see a return (not in our lifetimes) to the insanely easy credit terms and conditions of the past two decades. I’m sure they will ease at some point, but they won’t reutrn to the foolishness of the past decade. Meanwhile, home values are still sinking and won’t stop sinking until they reach long-term trend lines. That piggy bank is busted. That source of borrowing, which has driven debt accumulation for 20 years or more, is gone.

    Secondly — and Matt did not emphasize this enough — the credit crunch has shocked Baby Boomers profoundly. They’ve been over-spending and under-saving for a couple of decades now, but they managed to sweep that fact out of their mind. Now they’re looking at the remnants of their 401k plans and they’re realizing, holy s***, they aren’t close to saving up enough money to retire…. And they’re running out of time. Many Boomers are waking up to the fact that they have no choice but to spend less and save more if they want to have anything close to the standard of living they had assumed they would enjoy in retirement.

    Because Boomers are getting older, economic necessity will overlap and reinforce the life cycle shift in emphasis from the accumulation of stuff to the accumulation of experiences and relationships. Boomers will make a virtue of necessity by rediscovering the merits of thrift and frugality. (We’re not talking about ALL Boomers here — but enough of them to make a difference in consumption patterns.)

    Finally, as Matt argues, these changes coincide with the overall greening of America. People understand that it is not simply a personal virtue to conserve energy but a social virtue. Insofar as people live their ideals, they will aspire to drive smaller cars that consume less gasoline, and live in smaller houses that require less HVAC. That’s entirely consistent with spending less and saving more.

    Tighter credit standards, declining home values, Boomers’ need to save for retirement, the life cycle priorities of Boomers, and the spread of the sustainability ethic will all reinforce the trend to thrift.

    A number of economists quoted by the Wall Street Journal said they expect savings to rise from zero to about 10 percent, which is well within American historical norms. A shift of that magnitude would have huge consequences for the structure of the U.S. and global) economy. My instinct tells me that the economists may well be understating the case. We’ll see. Time will tell.

  21. Larry G Avatar

    Cutline: " Small House, Big Loan Spells Trouble"

    "The story of the two-bedroom, one-bath shack on West Hopi Street, is the story of this year's financial panic, told in 576 square feet. It helps explain how a series of bad decisions can add up to the worst financial crisis since the Great Depression."

    EMR ALERT – this is a "right-sized house in the "right-location" in Phoenix…

    the saga continues:

    "Less than two years ago, Integrity Funding LLC, a local lender, gave a $103,000 mortgage to the owner, Marvene Halterman, an unemployed woman with a long list of creditors and, by her own account, a long history of drug and alcohol abuse. By the time the house went into foreclosure in August, Integrity had sold that loan to Wells Fargo & Co., which had sold it to a U.S. unit of HSBC Holdings PLC, which had packaged it with thousands of other risky mortgages and sold it in pieces to scores of investors."

    Now I ask the BR jurors here. Is this not proof positive that the financial meltdown did NOT come from building wrong sized homes in the wrong locations?

    Go back and read the part that says… a mortgage to an unemployed person with a history of bad credit and then the part that says "packaged up the loan and sold it to 'investors' ".

    which means that the local mortgage company – that gave a mortgage for the right-sized home in the right location – did not have any skin in the game after they sold the mortgage and thus – no reason to be concerned about whether or not the loan got repayed much less whether or not it was in the right location and the right size.

    and here's more:

    " Ms. Halterman hasn't had a job for about 13 years, she says. She receives about $3,000 a month from welfare programs, food stamps and disability payments related to a back injury."

    "At closing, on Feb. 26, 2007, Integrity collected $6,153 in underwriting, broker, loan-origination, document, application, processing, funding and flood-certification fees, mortgage documents show. A few days later, Integrity transferred the loan to Wells Fargo, earning $3,090 more, Mr. Rybicki says."

    read on…..

    " After the fees and her other debts were paid, Ms. Halterman walked away from closing with $11,090.33.

    Ms. Halterman says she spent it on new flooring, a fence, minor repairs and food. "No steak or lobster," she says, "hamburger and chicken."

    Soon the money was gone.

    When Wells Fargo sold Ms. Halterman's loan to London-based HSBC, it got bundled with 4,050 other mortgages and used as collateral for a security issued in July 2007. More than 85% of the mortgages were, like Ms. Halterman's, "subprime" loans to borrowers with blemished credit, according to Tom Atteberry of First Pacific Advisors LLC, a Los Angeles investment-management company."

    "Some $4.1 trillion in American mortgages were put into securities such as these between 2005 and 2006,"

    Now.. how much was the bailout ?

    700 billion or so….

    oh oh… is that another train coming down the track?

    EMR – is this what you meant by "fundamental change"?

  22. Groveton Avatar

    So you want to improve the economy – do you? And you think people outside of NoVA need some help in these difficult times? Well, what about this?

  23. Anonymous Avatar

    I can accept Thornhill’s column as hypothetical, which is too bad for him. Some responses to your other points:

    (1) “First, financial institutions have been humbled by financial debacle they helped create. They are rapidly deleveraging, which means that we will never see a return (not in our lifetimes) to the insanely easy credit terms and conditions of the past two decades.”

    Don’t know if you have looked, but insanely cheap credit is available RIGHT NOW. Mortgage rates can be had for a little more than 5 percent 30 year fixed. Paulson and Bernanke have injected incredible amounts of credit into the system to get it moving — so much so that some economists actually fear a big bout of inflation when the crisis is over. Much of that credit hasn’t completely unfrozen the credit jam up from early this past autumn, but it will. I see this as temporary and we may be focusing on the wrong things. We’ll also have to see what kind of stimulus Obama comes up with.

    (2) “Secondly — and Matt did not emphasize this enough — the credit crunch has shocked Baby Boomers profoundly. They’ve been over-spending and under-saving for a couple of decades now, but they managed to sweep that fact out of their mind.”

    Not sure I agree. First, the megadebt is spread through all age brackets, not just boomers. Not true that boomers have been under-saving — they’ve been tucking plenty of savings away in shaky, market dependent 401 (k)s that management in Corporate America promoted so they won’t have to pay more. (More “magic of the market” bullshit as a big management tax dodge). Meanwhile Social Security remains unaddressed. Now the boomers have taken big hits of about 40 percent or more in their retirements. (Looked at yours yet?) There’s some truth about high credit card debt, but as a double whammy, the housing bust erased, at least for now, all those market gains the bomers expected. I believe this will all come back to some extent. In fact, a number of economists now believe that the recovery will be stronger and faster than expected. Stocks also lead the way in a recovery. And, there’s an argument that the sky isn’t really falling. UNemployment at nearly 7 percent is still way low in recession terms and comes nowhere close to the unemployment of the Great Depression of maybe 30 percent. Productivity is still way high. Energy prices are remarkably low.

    (3) “Finally, as Matt argues, these changes coincide with the overall greening of America. People understand that it is not simply a personal virtue to conserve energy but a social virtue.”

    I’m not so sure. You and Thornhill seem to be true believers from the Woodstock era (did I see him there? I don’t remember much about it). I prefer to believe in my wallet as an enforcer of behavior. What you are saying might be true if gas is $10 a gallon but it is now $1.50/gallon and with Ukrop’s special deal I got gas for something like 50 cents a gallon last month. This is a far cry from $4.20/ gallon not all that long ago. I think the AL Gore green campaign is running its course. The shock of the meltdown makes him seem so yesterday. Meanwhile, many economists have not paid enough attention to the energy price drops which in many ways are just as critical, if not more critical, a phenomenon as some overdue stock market drops and realignments in the investment banking community.

    I think you need to make a better differentiation between a bubble pop and a true, apocalyptic downturn. I may be wrong but I think we’ve been seeing more of the former than the latter.

    Yours in Malthus,
    Peter Galuszka

  24. Darrell -- Chesapeake Avatar
    Darrell — Chesapeake

    The age of responsible consumerism. What exactly is that?

    Boomers are cutting back because they are now ‘green’? A frugal Boomer? What about the other 75 percent of the population? Are they frugal consumers too? Drink that kool aid if it makes you feel better.

    Here are the facts.

    Americans aren’t frugal, they’re busted. You can’t have discretionary income if you pay out more than you earn. If such income is increasing, it’s because people have given up on paying off their debt. Real time statistics bear this out.

    Then there is the increased savings of boomers, being reported as a good thing. As I just said above, where is the money coming from? In many cases the money is flowing from ‘investments’ such as 401k’s and stock accounts. Cash out rates show this is true.

    Monetary policy usually goes like this. A tightening of policy results in an increase of savings, because the interest gained off such vehicles is risk free return. Loosening policy results in lower savings because interest returns fail to overcome inflation, forcing more money into riskier ‘investments’ or simply buying stuff. This is the basic tome’ of buying bonds or stocks.

    Yet we are seeing an increase in savings, when policy easing is at its lowest level ever. People are throwing money into a virtual mattress, sacrificing any chance of compounded wealth accumulation. Frugality? No. Irrationality fueled by fear of the unknown.

    The final pin in this economic voodoo doll is the government itself. When Uncle Sam begins socializing the economy, when he takes on the role of consumer while sticking you with the bill, then maybe you should be checking your bank account. Chances are you will find that the celebrated mattress is empty.

    And it’s all explained away by so called experts that America is becoming frugal.

  25. Larry G Avatar

    I'll buy it Darrel…

    my only point with the discretionary income is what happens if there is some….

    it can be spent (consumed) or saved (for later consumption).

    some day… maybe not soon.. more people will start receiving more discretionary income….

    the "theory" seems to be that folks will get the dooda scared out of them by this hellfire and damnation economic environment – and it will cause them to repent and start saving money.

    I'm not believing it folks.

    re: Walmart & Wilderness (Groveton).

    I invite ya'll to take a little drive down that way and cast your eyes upon the current "battlefield" which currently consists of a Sheetz, a McDonalds, a 7-11 and about a dozen other sundry strip shopping center businesses like tanning booths..

    … ALL of these already sitting on land in between the current battlefield and proposed Walmart.

    In other words, you have to stumble over the Sheetz and the 7-11 to get to where the WalMart is proposed….

  26. Jim Bacon Avatar
    Jim Bacon

    Peter, You make some good points — especially about the massive injection of liquidity into the system leading to easier credit. And you’re certainly right that the green mania could wane if we’ve entered another 30-year cooling period, as some think we have, based on el nino/la nina weather oscillations in the Pacific. That’s why I’m calling the “new fru” a hypothesis. Let’s see whether the numbers verify or falsify it.

  27. Accurate Avatar

    Actually, I tend to think like Larry. There will be a cutback in consumption, but only because the economy is sucking so badly. As the economy improves, so will the consumption. I also don’t buy into the ‘green’ argument, as usual there will be some who are swayed by that argument but many more basically care less if it’s ‘green’ or not.

    As for Anon 1:08 statement about insanely cheap credit still available. Yes, he’s right that those rates presently exist; however he didn’t mention the hoops that one has to go through to obtain the credit. From what I’m hearing it’s back to old school values like 20% down (and not the 2nd mortgage to obtain that 20%); and very high credit score and a long employment history with a good prospect as to continued future employment.

    I tend to lean towards Larry again when he tells the tale of the lady with 13 years of unemployment getting a loan for $103,000 – THAT is beyond absurd. EMR’s mantra has no meaning in this scenario, and in my (limited) opinion, never has had a lot credibility. Yes, the giving of loans to such unworthy people is due to greed on the part of banks and brokers and has NOTHING to do with location or size of the houses.

    Yes Jim, I fear that once the economy picks back up, so will consumption. It may have changed a bit here and there, but it will be back.

  28. Anonymous Avatar

    Accurate is right that while credit is cheap it is very hard to qualify. That’s because the banks are still stunned by the subprime mess. Even long-time, reliable customers (such as myself) are getting stiffed by credit card companies.
    I don’t know how much the prime rate can be cut, so there is credit available. And, one of the big problems for the bailout engineers is to actually get banks to start lending again. They will, soone ror later.

    Peter Galuszka

  29. Ray Hyde Avatar

    “If Obama decided that instead of spending money for 100,000 humvees a year, he might spend money for 80,000 humvees and 20,000 wind turbines – what would be the difference?”

    The difference wupld be huge. At present you can’t get a turbine for anything like the price of a HUMVEE. Not even including armor (not standard equipment) and armament.

    Otherwise, you are right. Sometimes the tradeoffs you make are not apparent, or the value doesn’t appear until later.

    That does not mean that you do not consider the tradeoffs with the best information available. It does not mean that everything you disagree with is imponderable.

    In fact, the mere exercise of trying to prioritize the costs and values of tradeoffs will make one aware of the information that is missing. Not only that, but there are known procedures for making decisions with imperfect data.

    I primary and important part of this is to list the ASSUMPTIONS as part of your argument. For example, when Republicans go on (or off) about additional taxes actually reducing revenue they ASSUME that we are somewhere on the right side of the LAFFER curve.

    Conceptually they are right, but hey may well be wrong in fact. The Laffer curve is usally presented as a bell curve, when it is more likely hypergeometric: The right side of the curve doesn’t happen until above 70-85% marginal tax rate.

    Ronald Reagan, as a successful actor, actually experienced higher tax rates than that, during WWII. Hence his personal interest in this topic.


    If you come up 20,000 HUMVEES short whe you need them, then someone else may wind up owning all those wind turbines you built instead.

    On the other hand, if you spend ALL your money on defense, you can still go bankrupt, as the Soviets did, and still securely freeze in the dark.


  30. Ray Hyde Avatar

    “if folks have discretionary income – whether it is now or 20 years ago… help me understand what has changed so that folks do very different things with discretionary income than they used to….”

    Good question.

    To my mind it is a fundamental fact that EMR doesn’t get.


    It will either be spent, or it will be saved and invested – spent by someone else in exchange for either interest, or a piece of the PROFITS – short term ones, at that.

    Right now, huge amounts of money are sitting on the sidelines. Often in low earning situations. It will either be spent or invested, and soon.

    The people who make the right bets on where to invest will obtain the benefit of profits made from the rest of the money that is spent.

    But one way or another, lots of things are going to be CONSUMED.

    As in the thread above, I don’t see the Cubans converting us to their lifestyle – not until they can afford an awful ot of HUMVEES.

    Otherwise the only way we get to less consumption is when we have an economy like CUBA – no foreign trade, no valuable local production, and if you do make anything, the government takes it away from you.

    Even in the Madoff case, that $50 billion didn’t disappear. Early investors got some at the expense of later investors. Madoff’e employees and sons got paid, Madoff has some.

    What is missing is the PROMISED money. The money that was never made because the investments weren’t made in producing products that people were going to consume.


  31. Ray Hyde Avatar

    “Some $4.1 trillion in American mortgages were put into securities such as these between 2005 and 2006,”

    Not all of them were as bad as the example, and not all of them will default. There is mortgage fraud, and mortgage fraud, and just bad decisions, reasonably made.

    The investors bought securities that were rated by corrupt ratings agencies, of which there are basically three. Regulators were asleep at he switch. someone will buy the home in question and live happily in it – at a bargain price. Bailout or no bailout, that price will affect YOUR equity.

    The question isn’t whether we should have a bailout, or what caused the need for it. The question is how do we limit the damage, given the situation we have. And how do we distribute the costs and benefits of that fix in the most equitable manner.

    We COULD just let the failures cascade down the moutain, starting at the top withthe big boys. But THEN we will still be in an avalanche, and we will find out how fast “trickle down” reall does work.

    Otherwise, there is another train comeing down the track. I’ll take my chances with a train, over an avalanche.


  32. Ray Hyde Avatar

    “People are throwing money into a virtual mattress, sacrificing any chance of compounded wealth accumulation. Frugality? No. Irrationality fueled by fear of the unknown. “

    Well said.

    It might apply to those who actually think it is reasonable or possible to cut carbon emissions by 80% without actually kinning nearly as many people as global warming will.

    Irrational frugality fueled by fear of the unknown.

    Wehn I plan a thirty day sea voyage, I might plan on food and water for 60 days. but as the unknown diminishes in the last 5 or 10 days, then I’m likely to binge, knowing it will be wasted anyway.


  33. Anonymous Avatar

    Don’t we need to work towards finding breakthroughs in affordable and renewable energy? Why do some want to return to a society where everyone lived and died two within two miles from where they were born?

    Sure we need to use energy more efficiently. But energy use is not a great evil like some would pretend it is. I spent sometime this weekend with some friends who are active in the Sierra Club — so they are leagues away from me on some issues. But they spoke not just of energy efficiency, but also about new sources of energy — off shore wind for example.

    We don’t need to become Jimmy Carters. We need leadership with the optimism of a Franklin Roosevelt and a Ronald Reagan.

    This country became great because of the ability to travel and trade between the states. We don’t need to make everything in Virginia even if we could. Let’s find ways to move forward. I don’t want to live in a company town, nor do many other people.


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