U.S. Citizens Save Themselves into a Recession
Published in Die Welt
(Germany) on 25 September 2011
by Inga Michler (link to original)
In the motherland of consumption, doubts about unlimited expenditures are germinating. U.S. citizens are questioning their way of life. That is very risky.
Little Jayna from Atlanta is turning two years old; her grandparents have invited 150 guests and a rented clown to a lunchtime buffet in a restaurant. The magic is over after the dessert — and the remains are staggering: 80 bulging bags filled with gifts, decorated with multicolored tissue paper. The worn-out parents unwrap more than 200 complete sets of clothing at home that afternoon.
Americans prefer to give gifts en masse. Friends, relatives, neighbors and acquaintances organize parties in their homes for brides-to-be, newborn and not yet born babies. The quantity of presents has grown with the sinking prices for cheap goods from Asia. More is better. That’s the way it was for years.
Land of Doubters
However, of all things, in the U.S., the motherland of consumption, doubts are germinating about unlimited purchasing. The index for consumer confidence of the renowned Conference Board plummeted to 44.5 points, the lowest level in over two years. The chief economist of the ratings agency Moody’s, Mark Zandi, prophesied, “This could become the first recession that we alone talked ourselves into believing.”
Rocky Turner, a dentist in Spartenburg in the state of South Carolina, has his own explanation for the current crisis. “We had too much for too long. We are lacking morals. We are lacking diligence,” says the massive family father bleakly. The whole country lived above its means for decades. No wonder that the economy now lies in ruins and the Chinese pass us by.
That is, however, not “sustainable.” The former football player, who with much diligence achieved a doctorate and a well-running practice, actually uses the word sustainability. For a passionate big game hunter from the Southern states such an idea is revolutionary. It also gives evidence of deep doubts regarding the “American way of life.”
Land of Debts
The skepticism is absolutely justified. Over-consumption has not wrought curious blossoms in the private sector alone. One’s own generous home or apartment is often not sufficient to store one’s possessions. The overall economy has also arrived at the margin of possible consumption. For years, Americans have used more than they have produced. In 2010 alone the current account deficit came to $470 billion; that is more than $1,500 per capita. To finance this deficit, a constant stream of foreign capital is necessary. The government also operates on credit. This summer it broke through the legally set debt limit of an unfathomable $14.3 trillion.
The largest creditor of the U.S. happens to be China. With money borrowed from China, Americans finance goods made in China that are in their clothes closets and warehouses. According to estimates of the IMF, the Chinese will already own one-third of all U.S. government bonds by 2015. Politics has recognized that the economic consequences are hardly manageable any longer. “We cannot continue to live beyond our means,” adjured President Obama when introducing a gigantic cost-cutting program in the spring.*
At the beginning of September he announced a big $450 billion budget program to stimulate the economy and take the unemployed off the streets. In recent times, Rocky Turner has cautioned his three grown children to be thrifty, but isn’t always met with open ears. His middle son has not yet paid off his loan for his wedding, but his wife is already planning the next big celebration, for his 30th birthday. Father-in-law Rocky can only shake his head. “This is not the right time to bet on rising income.”
The major trend might reinforce the arguments of the father. “The economic framework data literally forces Americans to return to reason,” says the chairman of the Social Policy Association, Michael Burda. The American, who earned his doctorate at Harvard and today teaches macroeconomics at the Humboldt University in Berlin, carefully examined consumer trends from the past 40 years. “For years, American consumers have lived beyond their means,” says Burda. “With the crisis, the money supply has been cut off.”
Land of Re-thinkers
Since then, less foreign capital flows into the U.S.; banks demand more collateral. Added to that, goods imported from China have become more expensive due to the weakness of the dollar compared to the yuan. “Many people can no longer afford their earlier over-consumption,” says economist Burda.
More thrift could well be a blessing in some areas of American life. With food, for example: two-thirds of all adults and one-third of the children in the U.S. are overweight. This costs the health care system about $200 billion a year, calculated recently by economists. In addition, price increases for gasoline and electricity are finally leading to shopping centers and movie theaters being cooled less than a few years ago. And at least among many, consumption has become a topic in conversations about new cars and trucks.
Cultural Change Takes Time
“A true cultural change requires a lot more time,” says president of the Kiel Institute for World economy (IfW) Dennis Snower. If the real estate crisis should continue a long time, however, the change could also embrace the lower class, which until now has not yet developed a “deeper understanding” of the achievement of less. The majority of them do not share the belief in education as an investment. They rely on consumption here and now, claim for themselves the right to share in affluent society with gold chains, Nike sneakers, souped-up cars and fast food. In contrast, portions of the middle class are beginning to think about an “expanded understanding of wealth” as called for by scientists like the German Meinhard Miegel.
The present crisis, with the disenchantment of Wall Street and its promise of riches, has left traces in the soul of the nation. Today, people in the center of society affirm the longstanding American moral of a rise through honest, hard work, of education and investment in one’s own future.
Jayna’s parents are convinced they have found the right measure for their daughter this time. They sorted the various gifts into two piles. In the higher pile are the gifts with so-called “gift receipts;” receipts with no price on them. Jayna’s mother will take these back to the stores over the next few days. “Even if I really liked the things — whatever has a receipt goes back,” she says resolutely. “Who needs so much stuff?”
*Editor’s Note: This quotation, accurately translated, could not be verified.
Little Jayna from Atlanta is turning two years old; her grandparents have invited 150 guests and a rented clown to a lunchtime buffet in a restaurant. The magic is over after the dessert — and the remains are staggering: 80 bulging bags filled with gifts, decorated with multicolored tissue paper. The worn-out parents unwrap more than 200 complete sets of clothing at home that afternoon.
Americans prefer to give gifts en masse. Friends, relatives, neighbors and acquaintances organize parties in their homes for brides-to-be, newborn and not yet born babies. The quantity of presents has grown with the sinking prices for cheap goods from Asia. More is better. That’s the way it was for years.
Land of Doubters
However, of all things, in the U.S., the motherland of consumption, doubts are germinating about unlimited purchasing. The index for consumer confidence of the renowned Conference Board plummeted to 44.5 points, the lowest level in over two years. The chief economist of the ratings agency Moody’s, Mark Zandi, prophesied, “This could become the first recession that we alone talked ourselves into believing.”
Rocky Turner, a dentist in Spartenburg in the state of South Carolina, has his own explanation for the current crisis. “We had too much for too long. We are lacking morals. We are lacking diligence,” says the massive family father bleakly. The whole country lived above its means for decades. No wonder that the economy now lies in ruins and the Chinese pass us by.
That is, however, not “sustainable.” The former football player, who with much diligence achieved a doctorate and a well-running practice, actually uses the word sustainability. For a passionate big game hunter from the Southern states such an idea is revolutionary. It also gives evidence of deep doubts regarding the “American way of life.”
Land of Debts
The skepticism is absolutely justified. Over-consumption has not wrought curious blossoms in the private sector alone. One’s own generous home or apartment is often not sufficient to store one’s possessions. The overall economy has also arrived at the margin of possible consumption. For years, Americans have used more than they have produced. In 2010 alone the current account deficit came to $470 billion; that is more than $1,500 per capita. To finance this deficit, a constant stream of foreign capital is necessary. The government also operates on credit. This summer it broke through the legally set debt limit of an unfathomable $14.3 trillion.
The largest creditor of the U.S. happens to be China. With money borrowed from China, Americans finance goods made in China that are in their clothes closets and warehouses. According to estimates of the IMF, the Chinese will already own one-third of all U.S. government bonds by 2015. Politics has recognized that the economic consequences are hardly manageable any longer. “We cannot continue to live beyond our means,” adjured President Obama when introducing a gigantic cost-cutting program in the spring.*
At the beginning of September he announced a big $450 billion budget program to stimulate the economy and take the unemployed off the streets. In recent times, Rocky Turner has cautioned his three grown children to be thrifty, but isn’t always met with open ears. His middle son has not yet paid off his loan for his wedding, but his wife is already planning the next big celebration, for his 30th birthday. Father-in-law Rocky can only shake his head. “This is not the right time to bet on rising income.”
The major trend might reinforce the arguments of the father. “The economic framework data literally forces Americans to return to reason,” says the chairman of the Social Policy Association, Michael Burda. The American, who earned his doctorate at Harvard and today teaches macroeconomics at the Humboldt University in Berlin, carefully examined consumer trends from the past 40 years. “For years, American consumers have lived beyond their means,” says Burda. “With the crisis, the money supply has been cut off.”
Land of Re-thinkers
Since then, less foreign capital flows into the U.S.; banks demand more collateral. Added to that, goods imported from China have become more expensive due to the weakness of the dollar compared to the yuan. “Many people can no longer afford their earlier over-consumption,” says economist Burda.
More thrift could well be a blessing in some areas of American life. With food, for example: two-thirds of all adults and one-third of the children in the U.S. are overweight. This costs the health care system about $200 billion a year, calculated recently by economists. In addition, price increases for gasoline and electricity are finally leading to shopping centers and movie theaters being cooled less than a few years ago. And at least among many, consumption has become a topic in conversations about new cars and trucks.
Cultural Change Takes Time
“A true cultural change requires a lot more time,” says president of the Kiel Institute for World economy (IfW) Dennis Snower. If the real estate crisis should continue a long time, however, the change could also embrace the lower class, which until now has not yet developed a “deeper understanding” of the achievement of less. The majority of them do not share the belief in education as an investment. They rely on consumption here and now, claim for themselves the right to share in affluent society with gold chains, Nike sneakers, souped-up cars and fast food. In contrast, portions of the middle class are beginning to think about an “expanded understanding of wealth” as called for by scientists like the German Meinhard Miegel.
The present crisis, with the disenchantment of Wall Street and its promise of riches, has left traces in the soul of the nation. Today, people in the center of society affirm the longstanding American moral of a rise through honest, hard work, of education and investment in one’s own future.
Jayna’s parents are convinced they have found the right measure for their daughter this time. They sorted the various gifts into two piles. In the higher pile are the gifts with so-called “gift receipts;” receipts with no price on them. Jayna’s mother will take these back to the stores over the next few days. “Even if I really liked the things — whatever has a receipt goes back,” she says resolutely. “Who needs so much stuff?”
*Editor’s Note: This quotation, accurately translated, could not be verified.
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