Last updated on June 5th, 2011
Without consumption, the entire system collapses on itself.
‘The System’ requires that people spend their money within it. In today’s modern society, nearly all of us are dependent to some degree upon the ability to purchase goods and services because most of us do not have all of the skills to be 100 percent self-sufficient. In fact, even if we had all of the skills, we would not have enough time to do everything ourselves in order to live in some level of comfort and well being. At a minimum, a community of self-sufficient minded people would be required to maintain an overall system that works well enough to maintain some comfort.
Back to ‘the system’… We buy things. Some things are necessary and other things are just stuff. It is all of the other stuff that ‘the system’ depends upon for its survival. Although we need a working system of commerce to supply us with the necessities of life, and maybe a luxury here and there, it all begins to go bad when the ever increasing demands for higher and higher sales and profits enter into the formula.
To get higher sales numbers, more stuff needs to be sold to people that buy the stuff. To get higher profits, either the stuff needs to be manufactured for less money than it was yesterday, or the price of the stuff must rise higher than it was yesterday.
We Buy Too Much Stuff
For far too long, Americans (and others in the developed world) have been buying too much stuff that they do not need. So, why is that the case? Well, it comes from psychological programming that we need the stuff. This mindset comes from peer pressure that has evolved over the years and originally came from (and still comes from) company marketing and advertising. We are told in direct and subliminal ways that we need this stuff. When enough people believe that they really need that new thing, then the person that does not have that thing yet, is looked upon as an outsider or someone who is not current or stylish or in-the-know. It rapidly becomes a case of keep-up-with-the-Joneses. It can be never ending, and can be relevant to small items as well as large ticket items. It is this very thing that has gone out of control for the majority of people.
We Are Maxed Out
A problem for ‘the system’ is the fact that the majority of people that have been caught up in this, are now maxed out. The debt load that is on so many people has reached the point where all of the tricks have been played out. All of the creative ways to borrow more money have been used up. The take-home income of so many people leaves hardly or no extra. It all either services the debt, or is used for the essentials of life.
Even the high society types are maxed out. How many company directors and executives really own the bling that they flaunt? The giant homes, the very expensive cars, the apparent lifestyle of the rich and famous. The fact is, so many of them are still dependent upon the next paycheck, albeit big paychecks, to keep up with their big loans for all of their big things. They really don’t have any more than you do. It is an illusion, unless you own it outright.
Endless Need For Higher Sales and Profits
Getting back to the endless need for higher sales… the fact that so many people are maxed out, or cautious of their spending in this recession (which they should be!) has presented quite a problem for many companies that are dependent upon selling bling, which is nearly all of them. So, what else can the company do to get better looking numbers for their next quarterly earnings report for Wall street? Answer, lower the cost of manufacturing the bling. This has been underway for some time now. Get the stuff manufactured in a country where labor and overhead costs are lower than your own. The obvious problem with that is for the workers and the middle class, some of whom will lose their jobs to the workers of the other lower cost country.
Country “A” eventually is lowered in class down closer to the level of Country “B”. Country “B” gets a bit of a lift in their class due to the increased business. The owners of the company in Country “A” mostly don’t give a $h!t because they get to live within the global community while making multi-millions of dollars or euros or whatever, so it’s not a concern. How many of them care only about themselves rather than their workers or country that they reside in?
Another way to increase profits is to lay off people while requiring those that are left to do all of the work. Again, this has been going on for some time now too. We have all seen the massive layoffs during this recession. The problem is, a company can only layoff a certain number of people and leverage the work of the remaining work force before they simply cannot physically keep up or become very disgruntled themselves.
Few Options Left
I believe we are mostly at this point today, where there are few options left. Hardly anyone can afford to buy more stuff and those that are left making the stuff are leveraged to the max with their work load. How can the company maintain the higher sales and profits that Wall street continues to price into the market? How can Wall street continue to go up with these fundamentals in place?
At this moment, I believe that the reason is because they expect that consumers will begin to spend more money again on stuff, like they used to before the meltdown in 2008. In my opinion, there is just barely enough consumer money on the sidelines that is being pumped back in to ‘the system’ (not to mention all of the government stimulus money that has been spent) that could hold the market for a little while longer. But when the people are all maxed out again, which won’t take long, then I fear another meltdown, which will be worse. The system has not been allowed to correct itself and has been propped up by Trillions of dollars and other currencies so as to postpone the big collapse.
“Americans already have enough stuff”
“The whole world has nearly enough stuff”
-quotes from George Ure’s site which inspired me to write this post
Without a new ground breaking technology to keep the Joneses buying more stuff, ‘the system’ as we know it today, will fail, in my opinion.
Be smart. Get out of debt. Be prepared. Dont’ fall into the spend trap again.