statusquobuster

When I was young talk about millions of dollars impressed me. When I was older talk about billions of dollars dismayed me. Now, regular talk about trillions of dollars, especially government spending, nauseates me. People never seem to learn that they control the fate of the American economy.

It is far too easy to blame in bad times or thank in good times Wall Street, the government, or super-rich and powerful financial entities. In actual fact it is always the spending of money by the general population on consumer products and services, housing, cars, or investments that drives the economy. The core problem is that the public does not act in concert to serve its own interests but, instead, takes its cues from the external world and puts its trust in the wrong people and entities.

In other words, besides all the blame that rightfully can be heaped on many others for the current recession, it is also true that the public through its dollars drove the nation and the world into the current meltdown, mostly by using far too much borrowing. They got suckered into using easy credit. True, in many cases, they acted on incorrect and intentionally misleading information and were taken advantage of. But so much of this consumer behavior was driven by greed or stupidity. Confidence was placed in government regulation, Congress, mortgage and other financial companies, banks, and more generally in the plutocracy that runs everything that matters. We had delusional prosperity because most of the population had willingly let themselves be deluded or manipulated by the power elites running the government and the economy. In essence, consumer power was usurped or pirated by the worst people in our society.

Here is the most critical fact. Consumers control over two thirds of the economic activity of the nation. Long before the current economic meltdown I kept writing about the potential political power of consumers. To get desired government actions, millions of consumers could threaten to cut their spending in order to get actions, like stopping the Iraq war or impeaching George W. Bush. But without leadership consumers just kept borrowing and spending, maintaining the delusional prosperity that they themselves propelled. Now they must act to fix things.

Now that the economic meltdown has hit us very, very hard it is critically important for people to understand that depending on the usual power groups to turn the economy around is dumb. Thinking that President Obama, Congress and various federal agencies, in particular, will save us is continuing the delusional thinking that has been like a chronic disease.

American consumers must understand that literally within days and weeks THEY themselves could turn around the economy. I was struck by data from the Federal Reserve that there is, even after the grotesque economic meltdown, presently a historic amount of cash is in bank and money market accounts, an astounding $8.85 trillion. Look at that number again. Relative to all the government bailouts and likely actions to stimulate the economy, that number is remarkable. That humongous amount of cash (not the value of homes and investments) comes to about $29,000 for every man, woman and child in the nation, or roughly $88,000 per household.

Your first thought may be “I don’t have that kind of cash!” In fact, economic inequality has risen terribly in recent years, helped by various public policies, making the affluent rich and the rich super-rich (and most of the middle class poorer). This means that much of this national cash belongs to a relatively small fraction of the population, perhaps 20 to 30 million people.

No matter how much cash we have, we must put our faith in ourselves more than the government or the business and investment sectors to turn the economy around. The more cash you have, of course, the greater your potential power to push economic recovery. We often hear about consumer confidence. Whether people are in the mood to spend or whether they have become too afraid for their personal financial security, causing them to spend as little as possible.

To turn the stock market and just about every segment of the private sector around, 10 to 20 million Americans must grab their inherent consumer power and start spending and investing with gusto, from home appliances, computers, cars, clothing, furniture, new homes, travel, and so on.

The stock market would immediately start to climb up, retail stores would stop closing, the automotive sector would resume producing cars, companies would start rehiring and the news media would start pumping out good news that, in turn, would trigger still more consumer confidence and spending. Suddenly, a positive spiral of economic activity replaces the hoarding of cash that has driven the negative economic spiral.

Think of that number $8.85 trillion again. Think of it relative to the billions and trillions constantly talked about to spur economic recovery through bailouts and other government actions, all of which must somehow channel money into consumers’ pockets or make credit for them more available. A modest fraction of all that cash, say a quarter, has the economic power to do more good than anything the government does. Better than all those government actions is the absolute certainty that rapid increases in consumer spending and investment would definitely drive the economy upwards. Positive consumer confidence can feed on itself psychologically, become a viral message that shoots the economy forward, reverses unemployment, makes stocks and mutual funds and, therefore, retirement accounts more valuable, and so on.

We sure could use some national leadership that motivates and inspires use of consumer power, rather than all the blabbering about what the government should or should not do. Americans have the choice to depend on politicians or to depend on themselves. Either use YOUR cash-power or remain victims of greed and corruption, as well as the inevitable incompetence of politicians and government officials. Consumer power awaits you. The nation needs it to avoid still more massive federal deficits and borrowing and inevitable tax increases. We the people must do much than vote; we must use our dollars to save our own financial health. Unless we shift our thinking and spend, we will stay in economic hell for a long time. We are the economic stimulus solution we’ve been waiting for.

[Contact Joel S. Hirschhorn through delusionaldemocracy.com.]

donsutherland1

Statusquobuster,

Although real personal consumption expenditures account for 70.5% of real GDP (2008 Q3), that does not mean that consumers "control" over two-thirds of economic activity. Things can and do shift over time.

More importantly, a threatened "strike" in consumer spending is a very blunt tool for political change. The electoral process offers a better mechanism.

If consumers were to cease spending, they would risk bringing substantial harm upon themselves in the pursuit of policy changes. After all, if consumers stop spending, businesses receive less revenue. In turn businesses would lay off workers. Those workers who lost their jobs would have reduced spending power, but they would still need to meet their basic needs. In short, a vicious spiral could result that would leave millions of people without jobs. All in all, self-destructive conduct is not a good way to exercise opposition to public policies one finds objectionable. Getting involved in the political process in the broadest sense possible is better.

Khayembii Communique

Consumers cannot act as a class for itself in any significant way, because consumers across the board hold different material interests and have no common basis for organization.

Arch Enemy

Indeed.

I also think that the system will heal itself (and fairly soon). There has just been major shafting going on and not just the lower-class (on the economic pole). These past months we've seen 401K's vanishing, and overall trust in the system careening, however the bison isn't dead yet; just stunned.

__________________
"I do not underestimate the ability of fanatical groups of terrorists to kill and destroy, but they do not threaten the life of the nation. Whether we would survive Hitler hung in the balance, but there is no doubt that we shall survive al-Qa'ida." -- Lord Hoffmann

Australianlibertarian

How can the US economy be saved, when the reality is that very few US consumers have genuine savings? How long can the credit induced consumerism go on, before the debt has to be payed?

Saving can also be very good for the economy, as saving allows re-investment of money into businesses.

What you are advocating is blatant consumption to save a huge amount of retailers and industries that would not have existed in the first place, had it not been for the cheap and ready supply of credit from central banks. In turn this created businesses and investments that were never truly profitable or sustainable. These mal-investments were only treading above water as long as the interest rates stayed low, and consumers kept buying stuff with their credit cards or borrowed money on the equity of their (supposedly valuable) houses......

Capitalism without savings can not exist. It's about time that Americans, Australians, Brits and Canadians stopped spending the savings of the Germans, Chinese and Japanese, and actually starting paying their debts of.

It is the blatant, fiat money induced credit-consumerism that is the crux of this mess. We do not need any more credit induced stimulus packages or consumer spending that is based on borrowed money; to help save industries that should have been the way of the dinosaurs a long time ago.

Khayembii Communique

What is "the system"?