Debtor’s Prison

An article in the LA Times on the current financial situation was particularly glum.  At least I can’t remember having seen, any time lately, language quite like it.  One line runs:

The nation’s long buying binge appears to be over. And that’s probably bad news for the economy.

Another line suggests this “binge” has been going on for roughly 2.5 decades.  This coincides with my general theory that the consumer society, as we now know it, began to achieve its full flowering roughly around 1980.

Here’s another part of the article:

Between 1980 and the end of last year, for example, average weekly wages of production and nonsupervisory workers, who make up 80% of the nation’s labor force, remained essentially flat. The trend convinced many analysts that consumers didn’t have the wherewithal to expand their purchases of goods and services.

But, as it turned out, Americans boosted their after-inflation spending by nearly half. In the process, they pushed up the fraction of the nation’s total annual output that goes to consumption from 63% to more than 70%, or by more than $1 trillion by today’s measure, according to government statistics.

Consumers managed this feat by doing three things — reducing their savings, taking on debt and relying first on rising stock prices and then on increased housing values to keep them financially whole. And for most of the last 2 1/2 decades, that strategy worked.

This fits with other stuff I have read in other places; the average real buying power of the average American, as based on real income, has risen only a few percentage points since the mid 1970’s.  Americans kept up, if that is the word, by having both partners in a relationship work more, and by something like a three week extension per year, of time put into work.  And of course by borrowing more and more.

Something made possible by a completely irresponsible extension of credit.

Samuel Johnson wrote in 1758, "It is vain to continue an institution [debtor’s prison] which experience shows to be ineffectual. We have now imprisoned one generation of debtors after another, but we do not find that their numbers lessen. We have now learned, that rashness and imprudence will not be deterred from taking credit; let us try whether fraud and avarice may be more easily restrained from giving it."

I guess things have not changed all that much.  A good thing though we no  longer have "debtor’s prison."

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