I recently read a piece in The New York Times, (linked at SHTF Daily) titled Somehow the Spending Doesn’t Stop. The author made some astute observations on consumer spending. But he didn’t go on to analyze some underlying phenomena. I have observed that here was a subtle yet profound shift in the psychology of indebtedness that took place in the late 1990 and early Aughts: Somehow the average American gradually stopped thinking about the total amount that he owes his creditors, and instead started focusing on his minimum monthly payment. Consequently, consumer spending soared. For more than a decade, Americans have been wanting it all, and getting it all. Collectively, their debts have been accumulating and compounding horrendously. It is as if they’ve been winding up an enormous spring. Imagine one of those novelty “joy buzzers” that pranksters used to conceal in their palms. But American have been winding up an enormous “No Joy” Buzzer.
Thanks to the monetary policies of “Easy Al” Greenspan and his successor “Helicopter Ben” Bernanke, credit has been free and easy. Credit card offers arrive in the mail like manna from heaven. Millions of Americans that do not deserve any significant credit have had lots of it. Enough to buy $300,000 houses. With this credit, like a child set loose in a candy shop that they have bought just about everything they’ve wanted: big screen televisions, home makeovers, fancy cars, and McMansions. They have maxed out their credit. Inevitably, however, the elasticity of credit is not infinite. At some point the piper must be paid. America’s credit spending spree will someday come to an abrupt end, most likely immediately following a sharp stock market correction. We will be startled by the noise and vibration of the big No Joy Buzzer. Bzzzzzzt! The party is over! At that point discretionary spending will drop to nil.
As consumer spending plummets, every business from mega corporations down to mom-ann-pop stores will start to lay off employees. Millions of employees. Those layoffs will mean that millions of monthly minimum payments will not be paid. Debt payment delinquencies, then defaults and finally bankruptcies will explode tremendously. Then it will take perhaps 20 years to unwind all the amassed consumer debt. It will be a very traumatic time–probably much more so than the Depression of the 1930s.Why? In the 1930s, nearly half of America’s families were farmers, ranchers, or fishermen. But now, just 2% of the population feeds the other 98%. If unemployment jumps into double digits, most families will no longer have “country cousins” that they can depend on to help feed them.
Got your storage food? Got a big vegetable garden? Got a gun and plenty of ammo? Got the training to know how to use it? You may need all of that, and more. Pray hard. Stock up as much as you can, so that you can dispense copious charity. You neighbors will likely need it.