Comments on: Warren Buffet’s Appeal to Our Dead Consumer Culture: ‘Buy American’ http://www.citizeneconomists.com/blogs/2008/10/23/warren-buffet%e2%80%99s-appeal-to-our-dead-consumer-culture-%e2%80%98buy-american%e2%80%99/ Citizen Economists is an online economics magazine written by citizen journalists. These ordinary citizens provide reports and commentary on the current events affecting the economics of the fields they work in. Wed, 08 Feb 2012 04:44:52 -0500 http://wordpress.org/?v=2.8.4 hourly 1 By: Evelyn Black http://www.citizeneconomists.com/blogs/2008/10/23/warren-buffet%e2%80%99s-appeal-to-our-dead-consumer-culture-%e2%80%98buy-american%e2%80%99/comment-page-1/#comment-2243 Evelyn Black Fri, 24 Oct 2008 10:49:05 +0000 http://www.amateureconomists.com/blogs/?p=359#comment-2243 Thank you for your comment J. Ed. Grey. I know you speak for lots of people in saying that "go now, pay later" got us into this mess. That's a great point. However I think there are other ways to achieve what you call "...the movement of a currency through the different levels of society," the most obvious one being a influx of new industry and new jobs all of which offer middle class wages and benefits. Since I don't see any such development on the horizon right now, it's my belief the current slowdown will be protracted. So, investing in American stocks is not a bad idea and is definitely a great thing to say right now with all the negativity in the press these days, but as you point out so well, without new and significant investment in industry or some solid source of jobs and prosperity, the American people will go back to abusing credit, and Wall Street will go back to inflating the few assets that remain (like housing). We'll see yet another bubble eventually and do it all over again. When I was young we had a thriving economy with lots of movement of currency, but the use of unsecured credit was frowned upon. HELOC's were called 'second mortgages' and came with an element of shame---now they're marketed as perks for homeowners. But--and this is a big but--back then we also had a thriving middle class. One household member with an industrial job could support everyone under that roof. Now we have households where each adult member has a couple of $8 or $10 an hour jobs and there still isn't enough money to cover rent, utilities, food and medical care. If credit is available at the end of the month in that scenario, those people will use it--and they do. We haven't even seen the unsecured credit bubble burst yet--watch for that next. It won't be pretty. Thanks again for your thoughts. Thank you for your comment J. Ed. Grey. I know you speak for lots of people in saying that “go now, pay later” got us into this mess. That’s a great point.

However I think there are other ways to achieve what you call “…the movement of a currency through the different levels of society,” the most obvious one being a influx of new industry and new jobs all of which offer middle class wages and benefits. Since I don’t see any such development on the horizon right now, it’s my belief the current slowdown will be protracted.

So, investing in American stocks is not a bad idea and is definitely a great thing to say right now with all the negativity in the press these days, but as you point out so well, without new and significant investment in industry or some solid source of jobs and prosperity, the American people will go back to abusing credit, and Wall Street will go back to inflating the few assets that remain (like housing). We’ll see yet another bubble eventually and do it all over again.

When I was young we had a thriving economy with lots of movement of currency, but the use of unsecured credit was frowned upon. HELOC’s were called ’second mortgages’ and came with an element of shame—now they’re marketed as perks for homeowners. But–and this is a big but–back then we also had a thriving middle class. One household member with an industrial job could support everyone under that roof. Now we have households where each adult member has a couple of $8 or $10 an hour jobs and there still isn’t enough money to cover rent, utilities, food and medical care. If credit is available at the end of the month in that scenario, those people will use it–and they do. We haven’t even seen the unsecured credit bubble burst yet–watch for that next. It won’t be pretty.

Thanks again for your thoughts.

]]> By: J. ED. Grey http://www.citizeneconomists.com/blogs/2008/10/23/warren-buffet%e2%80%99s-appeal-to-our-dead-consumer-culture-%e2%80%98buy-american%e2%80%99/comment-page-1/#comment-2235 J. ED. Grey Thu, 23 Oct 2008 22:46:27 +0000 http://www.amateureconomists.com/blogs/?p=359#comment-2235 The statement that "people can't spend money they don't have" is not supported by any historical data, but rather just the opposite. Our economic health depends on the movement of a currency through the different levels of society, and so far the only solution applied is the "Go now, pay later" fallacy which is in direct opposition to the statement in question. The moral and ethical basis for this fallacy can be a lengthy subject beyond the scope of this publication. For several decades most individuals and organizations from the US Government on down, have been spending money they don't have, and this is exactly what has brought on the current situation. Instead of joining the growing chorus of criticism of highly visible entities such as Presidents, Governments, Banks etc. who may or may not be partly responsible, the clear responsibility rests squarely on the shoulders of the consumer driven public. We can plead ignorance or apathy and offer all kinds of rationale, but the bottom line is, we must learn and apply the difference between greed and need. The statement that “people can’t spend money they don’t have”
is not supported by any historical data, but rather just the opposite. Our economic health depends on the movement of a currency through the different levels of society, and so far the only solution applied is the “Go now, pay later” fallacy which is in direct opposition to the statement in question. The moral and ethical basis for this fallacy can be a lengthy subject beyond the scope of this publication. For several decades most individuals and organizations from the US Government on down, have been spending money they don’t have, and this is exactly what has brought on the current situation. Instead of joining the growing chorus of criticism of highly visible entities such as Presidents, Governments, Banks etc. who may or may not be partly responsible, the clear responsibility rests squarely on the shoulders of the consumer driven public. We can plead ignorance or apathy and offer all kinds of rationale, but the bottom line is, we must learn and apply the difference between greed and need.

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