

James Surowiecki: US consumers won't stay frugal forever - cwan
http://www.newyorker.com/talk/financial/2009/10/12/091012ta_talk_surowiecki

======
run4yourlives
"Frugal" assumes that you have money and choose not to use it. It also assumes
that the current recession is caused by people's fears, and if they could only
_think rationally_ things would go back to "normal".

That's fundamentally flawed.

You can't be frugal when what you are is better described as poor. I know it's
difficult for the boomers to understand this, but their "normal" is in fact a
grand exaggeration that is not-sustainable. The average American carries far
too much debt, live well beyond their means, and has enjoyed historically low
interest rates.

The reality is that this debt needs to be repaid, if not at this moment, soon
enough. All we've done to "correct" this recession is throw money at the worst
parts in hope that it all goes away. At best, all that we've done is delay the
inevitable accounting that must be done.

Prices are too high - across the board - for the average wage. People cannot
sustainably live middle class lifestyles on the average wage. Even better,
people's idea of what constitutes a middle class lifestyle has been inflated
into a unmaintainable ideal. That needs to adjust, and it's going to hurt
whether we like it or not.

The problem with bailouts and such is that all they do is pass this eventual
day of reckoning down to the next generation. (I suppose that fits with the
boomer "me" ethos perfectly, after all.)

The problem with articles like this is that they live in some sort of fairy
land where people are still able to spend more, and just choose not to.

~~~
joe_the_user
Lol (well, laughing through my tears...),

Well, the baby boomers _would_ certainly go back to their long-term
unrealistic "normal" if they could. _And it's possible_ that a big enough
round of public finance and private bubble may get this pseudo-normalcy going
for a while - that's what all of the crisis intervention has talked about so-
far; "getting banks lending again", "getting things back to normal".

Of course, we've seen in the last twenty years that each "return to normalcy"
has been punctured by a bigger fall. I shudder to think what it would be like
next time, _if_ there is a next time.

------
mattmaroon
I tend to agree. If Americans are good at one thing, it's not learning the
lessons of history.

~~~
cwan
I don't think that's a uniquely American trait... something about being human.
That said, I'm not sure that spending itself was the lesson that needs to be
learned - it's about going into debt to spend on things that didn't generate
value/and were unnecessary.

With respect at least to this point, I think Americans will ultimately be more
frugal because they'll have to be (higher interest rates, lower debt ratios).
Previously unsustainable low interest rates along with loose loan underwriting
obviously didn't help.

