Introduction
Many middle class Americans have been facing tighter budgets as food, energy and housing costs have been rising faster than their income. In this post I attempt to explain this and other related issues, why recent economic developments are just the first part of a larger, long term trend, some of the economic impact we should expect to see going forward, and how this is likely to impact specific sectors of economy and the financial markets. This is an important concept I've been developing for a long time. Any and all questions, comments and feedback are appreciated as I hope to improve and expand upon this "short version" for use as an article for other media outlets.

Over Consumption
On average, Americans consume far more resources than the rest of the world (many interesting stats can be found here: http://www.mindfully.org/Sustainability/Consumption-Industri... ). As a nation we most likely got in the over-consumption habit by having a great deal of productive land at our disposal with a relatively small population. Later, our economic and military dominance enabled us to exploit the resources of many developing nations. Recently, American over-consumption has come as a result of our taking on massive amounts of debt and selling off productive assets to foreigners at a rate of over $1 Trillion every two years. With consumption on the rise in developing nations, and America's financial and military strength on the decline, the level of consumption in the United States is likely to decline substantially in coming years. The question becomes: How will the decline in American consumption likely manifest itself in macro-economic trends and investing imperatives?

Forced Reduction of Consumption
People aren't likely to voluntarily reduce consumption just because it is an economic inevitability. Most people will be forced to reduce consumption as a result of a decline in purchasing power in a changing economic landscape. Two of the main ways that this is likely to occur have already begun having an impact on American consumers. The rising cost of essential goods, like food, energy and housing, cuts into the quantity and quality of goods people can consume and greatly reduces their ability to buy non-essential items. Rising interest rates place a further burden on discretionary spending by increasing monthly expenditures for Adjustable Rate Mortgages and consumer debt service. Two additional factors that will lead to an even sharper decline in consumption have not yet begun and are currently prolonging the period of over-consumption. Easy access to credit from private banking institutions and record federal deficit spending have helped many Americans temporarily keep up high levels of consumption at the expense of their wealth and financial security. Viewed independently, all four of these areas might appear to to be short term, unrelated factors, but viewed in the context of a necessary decline in American consumption it becomes apparent both how closely they are all related, and why their convergence means we've reached an inevitable turning point that has marked the beginning of a long period of declining standards of living.

Who Gets Hit the Hardest?
Demographically speaking, the American middle class is responsible for the largest portion of discretionary spending and should therefore face the greatest decline in living standards. There are many poor, but their ability to decrease consumption without dying is minimal. The wealthy consume a great deal more, but their numbers are few and raising taxes isn't likely to slow their consumption much. Dividing the economic pie is a political game and there is little doubt that wealthy Republican supporters have been spared much of the pain as there people have been in control in Washington. Asset prices have soared while corporate profits and executive salaries have grown rapidly in the first part of this century. Meanwhile, working class and poor Americans have been taking on a disproportionate share of the pain as rising expenditures for heating, transportation, housing and debt service have cutting into already tight budgets. Going forward, there is likely to be much more pain to share (especially from rising energy costs) and political change is possible if there is enough outrage over declining living standards for middle and working class families. Whether or not the political focus shifts to providing a better safety net for the poor while raising taxes on the wealthy, the continuing Middle Class Squeeze will be necessary to reduce American consumption to ecologically and financially sustainable levels.

Implications for Investors
Going forward, there are certain sectors that should be avoided by prudent investors. While the broader indices have remained remarkably stable, many retail stocks have been declining since late July as retail sales have been disappointing and consumer confidence has fallen off a cliff. Service sector companies and jobs in particular are at risk because they are most dependent on discretionary spending. Housing and financial stocks have also begun breaking down and are vulnerable to bigger declines as trends accelerate, especially homebuilders and mortgage lenders who profited by taking on high levels of leverage and risk during the boom. Public utilities are vulnerable as energy costs rise if the political will shifts to shielding consumers from rising energy costs as it did in California during that state's recent energy crunch. Lastly, most bond investments should not be considered 100% safe. Municipal bonds in particular are vulnerable as many local governments have gotten themselves deeper and deeper into debt. Even US treasuries should not be considered as the national debt has reached a point where it may be politically impossible for the government to pay it off. Not all middle class Americans have been over-consuming as badly as the average citizen, and many have saved up diligently for retirement. In recent months Asian stocks in particular have done well, and a steady shift in consumption from the US to the countries who've been financing the trade gap likely means that this is an early stage of a much larger trend. It is imperative that middle class investors be aware of the evolving trends so that their retirement portfolios can provide a cushion against the ongoing Middle Class Squeeze.

It is imperative that middle class investors be aware of the evolving trends ...
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Indeed. Currently, ... most important on-going development is that China, India, Eastern Europe, at el, are merging - at full speed, into a global markets scene. Its, ... sort of, an equivalent of an Industrial Revolution II, if you will. It all spells an enormous shift in labour, environment and finance. All one has to do is look at current changes to the energy sector. Shift in energy demand is only a precursor, ... a glimpse, if you will, of what future may look like. Shift in energy, first, ... then other shifts follow. Just watch! fwiw.

C.

The squeeze will hit markets outside the US much harder than inside. My family is typical middle class and I estimate 50% of our monthly outflows goes to junk or unnecessary food expenditures (often the same thing). Other than US restraunts, most of the other junk is imported and won't cause any problems in the US when everyone is forced to cut back.

I'll bet we have enough cloths in my house to last us several years if times get tough. We have so many cheap jeans and shirts that we are forced to give away a car load every year just to make room for the new stuff. All that is in US closets now could be recycled thru thrift stores and keep us all clothed for the next 5 years without buying anything new. Other junk can be recycled and keep us happy for several years without buying anything new. The nation will have one big extended garage sale...

I doubt the middle class will be hurt thru any of this. My opinion is that it will make the US stronger of character - much like those who grew up in the 30's, 40's, and 50's....

Andy

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I doubt the middle class will be hurt thru any of this. My opinion is that it will make the US stronger of character - much like those who grew up in the 30's, 40's, and 50's....
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All well and good as long as you still have a job. For those of us that make what some people would consider junk once their disposable income decreases, well we are a bit nervous.

Roger, you might want to add medical care to that list of essentials whose price is rising faster than inflation.

In terms of demographics, you might want to add the effect of aging baby boomers, who will require more medical services/products, even as they become less productive (retire).

In terms of Asian stocks, you might want to consider that these are export-driven economies. If the U.S. has a recession, the suppliers to our retailers will be hard-hit, which may cause the Asian stock markets to drop even faster than the U.S.

Until China and India have enough market demand to buy a significant proportion of each other's goods (remember, most of their populations live in third-world poverty), the U.S. will be an essential market for them.

Wendy

All well and good as long as you still have a job. For those of us that make what some people would consider junk once their disposable income decreases, well we are a bit nervous.

What kind of junk do you make?

The squeeze will hit markets outside the US much harder than inside. ...
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Well, ... that is one view. My view is that as China, India, Eastern Europe, et al, industrializes, ... wealth will continue to grow over there, ... and not here. After all, we don't hold a patent on economic growth, do we?<gggg> Think for a moment: ... if China's, India's preferences for wealth and prosperity even partially is reflective of that what U.S. is experiencing / enjoying, ... surely, China's, India's consumption of goods and services will have to increase, ... and it is not very likely that China and India will seek those goods and services, say, from U.S., is it? One only has to take a population distribution under consideration. Reletively a small percentage of, say, Chinese population of ~1.4 billion can very easily neutrelize or even pre-empty totally dropping requrement for certain set of goods and services in U.S. Have a look at goods such as hamburgers and fries, ... as an example, ... the rate of consumption growth, that is.

I know, this currently is an irreverent opinion, ... but I sense that U.S. is very much at risk of being left behind by the rest of the world. fwiw.

C., ... watching 'shifting sands'!

Thanks Wendy, wcaseym and everyone else for the comments and suggestions.

In terms of Asian stocks, you might want to consider that these are export-driven economies. If the U.S. has a recession, the suppliers to our retailers will be hard-hit, which may cause the Asian stock markets to drop even faster than the U.S.

In my own portfolio I've sought to add companies that will benefit from rising consumer spending within their own region.

There may be economic disruptions along the way, but so far it seems like the central bankers of the world will try to make the shift in consumption from America to the rest of the world go as slowly as possible, thus greatly increasing the duration and ultimate size of the change.

<Think for a moment: ... if China's, India's preferences for wealth and prosperity even partially is reflective of that what U.S. is experiencing / enjoying, ... surely, China's, India's consumption of goods and services will have to increase, ... and it is not very likely that China and India will seek those goods and services, say, from U.S., is it? >

China and India are actively working on economic treaties, for exactly this reason. After decades of strife, over territory, these billion-plus nations are shifting to a win-win strategy.

The sands definitely are shifting. It may take decades, to bring the billions in poverty into the modern economy, but when it happens, the U.S. economy will be irrelevant, to the new Asian super trading bloc.

Wendy

In my own portfolio I've sought to add companies that will benefit from rising consumer spending within their own region.
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I concur. In my case, my next moves are charted by where energy consumption growth is greatest. Idea is that you need to grow energy consumption, first, ... before you start turning out goods. For example, I am sure that IR is causing a substantial growth for energy needs in China, ... and IR is not relenting. Next thing you will see that Bobcats © , Club Cars ®, ... Schlage ® locks which we have been consuming in N. America for years, will find many consumers in China. After all, I think pretty well all these goodies are nowdays manufactured in China, anyway.

C.

... also, IR no longer resides in Woodcliff Lake, NJ, ... but Hamilton, Bermuda. How times are changin'

I concur. In my case, my next moves are charted by where energy consumption growth is greatest

Better than gold. Can't run a car on a bar of gold.

doubt the middle class will be hurt thru any of this. My opinion is that it will make the US stronger of character - much like those who grew up in the 30's, 40's, and 50's....

The middle class is already hurt.

All they buying of that extra unnecessary junk is what keeps the economy going. Snow is having a fit because the Asians won't join in.
Americans stop buying the junk then we don't need to make it. We layoff workers and they can afford to buy less junk. Investors see this happening and panic. More layoffs ensue, and there is less junk buying.

Keep buying that junk.

Your buddy who saves every penny he can
goofy

In my own portfolio I've sought to add companies that will benefit from rising consumer spending within their own region.
What are your sources for research on these companies. Are they simply ones with zero US sales and no significant foreign competitors? I have been having trouble determining which Asian and Indian companies get the vast majority of their sales internally and which would not be hurt if outside competitor prices dropped greater relative to their prices.
--Smufty

concur. In my case, my next moves are charted by where energy consumption growth is greatest.


One other area you may want to consider is food. Food is the number one consumable. As China and India move up the development index, the most dramatic change in people lives is the change from eating the food you grow yourself to food you buy at the supermarket. Farmers don't buy food, Workers HAVE to buy food. Up to the next change, moving from the working class to a more leisurly life, food quality consumption is also one of the more dramatic change: (more meat, more prepared food, etc.) In addition, China and to some extent India, are very much concerned about the national food supply (you know, this silly idea that if someone who doesn't like you owns your food supplies you're screwed. ;-) ) China is also well aware that the one thing that could very well end the regime is a large scale food shortage.

China's food industry is less dependent on the the U.S. consumer. On the contrary, a export led recession in China would put tremendous pressure on (and probably a lot of government help to) the food industry to lower the cost of food (i.e. consolidation, economy of scale, supply chain management, etc. etc.).

Regards,
Capitanfracassa

The sands definitely are shifting. It may take decades, ...
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... or just split second, ... or any time frame in between. Its true. You see, there is a fundamental difference between, say, China, India, ... and the U.S. China, India are countries within their very own borders. U.S., ... on the other hand, is a country, to be sure, but it includes as well a hodge-podge of overseas possessions, territories and outposts. There is a great risk in maintaining such a country, ... and not to mention ever-increasing risk if such country is actively expanding. Lots of room for errors. More errors the grater a chance for a fatal one, ... hence a suggestion of split second. fwiw.

C., ... always on a lookout for an unscheduled freight train.

One other area you may want to consider is food. Food is the number one consumable. As China and India move up the development index, the most dramatic change in people lives is the change from eating the food you grow yourself to food you buy at the supermarket. Farmers don't buy food, Workers HAVE to buy food.

Thanks Capitan,

Food is an interesting area with regards to this topic. What we eat is much more flexible than how much we eat. As budgets are squeezed people can shift their food consumption from meats to grains to bring it more inline with the rest of the world. Despite having plenty of productive farmland, America has recently become a net importer of aggricultural products. An interesting stat from the link I provided in the original post:

Producing 1 pound of wheat requires 25 gallons of water with modern Western farming techniques. Producing 1 pound of beef requires 5,214 gallons of water.

In addition to water, much more petroleum based fertilizer is required to produce the food that cows eat up to the point where they "become" beef. Comfortably middle class Americans haven't had to worry about what they eat in the past, but as resources become scarce, the cost of producing meat and bringing it to market may rise much more rapidly than the costs associated with grains. As budgets tighten, more Americans may feel a need to shift their dietary habits to save money on food.


China's food industry is less dependent on the U.S. consumer. On the contrary, a export led recession in China would put tremendous pressure on (and probably a lot of government help to) the food industry to lower the cost of food (i.e. consolidation, economy of scale, supply chain management, etc. etc.).

Having been to China 4 times (2 adoption trips and 2 dragonboat racing trips), it was interesting to observe the dietary habits of Chinese in different regions and at different socioeconomic levels. China is not going to have a problem buying enough food on the open markets and there is still plenty of unused land to produce more food (at least as seen from the air) and driving through the countryside.

China seems well aware that it cannot depend on the US consumer indefinately and I believe the change in currency peg back in July was a wise step in shifting their export focus from the US to regional partners. As long as the US government and Federal Reserve are willing to piss away American wealth by propping up the current level of over-consumption, China may as well continue racking up the reserves and boosting its manufacturing and economic base. I expect that the Chinese are preparing for a time when Asia consumes a much larger percentage of global resources. I don't fear a global depression as the world seems set on make the US pain long, dull and slow, rather than sharp and shocking.

C,

My view is that as China, India, Eastern Europe, et al, industrializes, ... wealth will continue to grow over there, ... and not here.

I agree, and it's not just the industrialization that is creating the shift. America's ability to borrow from the rest of the world appears to be reaching its limits. I expect that the decline in US consumption will be offset by increased consumption almost everywhere else.


I know, this currently is an irreverent opinion, ... but I sense that U.S. is very much at risk of being left behind by the rest of the world. fwiw.

I'd see it more of a matter of just declining to be closer to the average. No doubt US living standards will remain well above those of poorer nations, as they fall behind many others. That said, our safety net for the poorest of the poor has been eroded over the past 25 years, the gap between rich and poor in the US is among the greatest in the world, and the current administration seems ideologically opposed to government intervention to keep living standards bearable for Americans living in poverty. Many American families may well be "left behind by the rest of the world" as they are left by their fellow Americans to fend for themselves in a depressed economy.

Other than US restraunts, most of the other junk is imported and won't cause any problems in the US when everyone is forced to cut back.

Surely there would be an impact within the US too?

The junk that is imported generates employment within import businesses, hauliers and the shops and businesses they supply to name just a few off the top of my head.

If everyone cuts back and those jobs are lost then you have further downward momentum in the economy.

I agree, and it's not just the industrialization that is creating the shift. ...
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Yes, that too, ... but also this: ... everything that happens in/to/around/about the U.S. is viewed (... and subsequently reacted to) in Washington through a prism of whether it is good for Mr. Bush, ... or bad! Such political reactivism is absolutely devastating to the economical well being of the country.

C.

Producing 1 pound of wheat requires 25 gallons of water with modern Western farming techniques. Producing 1 pound of beef requires 5,214 gallons of water.

That surprises me. I was taught in Ecology 101 that the energy transfer efficiency up the food chain is 10%; i.e., it takes 10 lb. of plant matter to yield 1 lb. of herbivore, 10 lb. of herbivore to yield 1 lb. of 1st order predator and so on. If we're really using 25 gal. of water to produce 1 lb. of wheat--where, eastern Colorado?-- I would expect to need no more than 250 gal. per lb. of beef. I know we squander water more than anything else in Squanderville but I doubt they're using the difference to hose the crap out of the feedlots.

-fly

Producing 1 pound of wheat requires 25 gallons of water with modern Western farming techniques. Producing 1 pound of beef requires 5,214 gallons of water.
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That surprises me. I was taught in Ecology 101 that the energy transfer efficiency up the food chain is 10%; i.e., it takes 10 lb. of plant matter to yield 1 lb. of herbivore... If we're really using 25 gal. of water to produce 1 lb. of wheat--where, eastern Colorado?-- I would expect to need no more than 250 gal. per lb. of beef. I know we squander water more than anything else in Squanderville but I doubt they're using the difference to hose the crap out of the feedlots.

Gee, the 25 gallons of water to produce a pound of wheat seems low. The Internet gives us US averages around 60 pounds/bushel, 35.3 bushels/acre, so at 25 gallons per pound of wheat, 52,950 gallons per acre. An acre-inch is 27,154 gallons, so 1.9 inches of water. You need a lot more than that in the form of rain to deal with evaporative loss from the soil -- I don't care where you're trying to grow wheat, you get 2 inches of rain during the season and you don't get any wheat. Even discounting soil loss, plants transpire quite a lot of water vapor.

Cattle need plenty of water. According to the USDA, 25-50 gallons per day. A Canadian source says 8-15 gallons per day, but they're further north and it's not as hot. Assume the steer is slaughtered at age 18 months, and 5,214 gallons gives an average of only 9.5 gallons per day -- a number at the low end of the range, so probably pretty conservative.

Ah, the smell of burning numbers... :^)

As budgets are squeezed people can shift their food consumption from meats to grains to bring it more inline with the rest of the world.

And making the shift from meats to grains (and beans, to complete the proteins) would reduce medical expenses (colon cancer for one, diabetes for another, and the costs of death from CJD (mad cow) that is untreatable at the moment.

China is not going to have a problem buying enough food on the open markets and there is still plenty of unused land to produce more food (at least as seen from the air) and driving through the countryside.

They may have the money, but producing more food on their unused land is a major problem because they do not have enough water. The water table in China is dropping rapidly. The farmers outside Beijing can no longer farm because the water needed for irrigation is confiscated for drinking and sanitatary purposes in the city. China will have major problems feeding its people, and the government has known this for quite a while. One reason for their one child per family regulations. Lester R. Brown's 1995 book, Who Will Feed China? goes into this in great detail.

And making the shift from meats to grains (and beans, to complete the proteins) would reduce medical expenses (colon cancer for one, diabetes for another, and the costs of death from CJD (mad cow) that is untreatable at the moment.

Sorry if I'm getting off topic here a bit, but this is quite a simplification. We would be exchanging one set of morbidities for another. For example, the rates of stomach cancer are sky high in countries that have a mostly grain-based diet.

In addition, I don't really agree that diabetes rates would go down with more grain comsumption, I believe its the large amounts of processed carbohydrates (not meat) that contributes to our obesity and diabetes epidemics. There is more obesity and type II diabetes among the lower-income segements of our population than the middle and upper segments. Who do you think eats more meat?

Adenovir

Even US treasuries should not be considered as the national debt has reached a point where it may be politically impossible for the government to pay it off.

The Nat'l debt as a % of GDP is about where it normally resides, slightly above average, [for the post WW2 era, iirc.] It's about 64%, lower than Japan, Canada, Italy, Germany, France.

recent months Asian stocks in particular have done well, and a steady shift in consumption from the US to the countries who've been financing the trade gap likely means that this is an early stage of a much larger trend.

Now this may be excellent insight.

best as always,

Naj

It is always amazing to me how a brief period of bad markets can influence peoples perception of the entire market place. First let's look at the stock market. Historically August and September have been the worst months of market performance with October being the most volatile. We ended September up slightly, but very slightly and then slid further in October. You have to remember that just about every singular bad event has happened to the market in October and you can not judge an entire market by one month. The crash of 1929? October. The crash of 1987? October. I think there was a crash in the 50's or 60's but that was before my time in the market.

Second, let's look at the inflation costs. Greenspan can't open his mouth without some comment coming out about how the housing market is making him nervous. It seems that it has taken a while for people to realize that he is dead set on raising rates until the housing boom is squelched. Certainly some of the transactions we have seen taking place in other parts of the country would leave you to believe that markets are hot. There is just one problem; as more Americans have disposable income to spend on a vacation home or investment property demand will increase. However, we aren't making any more beach front or oceanside property so supply can't be increased. Eventually rising prices will price people out of the market anyway. Greenspan hasn't seemed to figure that part out.

The part Mr. Greenspan so lightly dismisses is rising energy costs. Now, energy costs have certainly been rising because world wide demand has been rising. President Bush's solution to the energy crunch was to offer tax incentives on Hummers and other large SUV's and then propose to drill in the Alaskan wild-life preserve. This seems a bit backwards to me and I am a Republican and I voted for Bush.

But the real question is, "Do we really have an energy crisis?" There were several times over the last year where Saudi Arabia offered more production capacity but there were no takers. Why? It seems that over the last 20 years or so that many refineries have been taken off line and moth balled. This was done partly because of changing emission standards and partly to give some pricing power to the refiners......and it seems to have worked.

As far as the middle class consumer goes we could look at past history to see what might happen if we have an economic downturn. If we use the past as an indicator people will buy less of the "junk" as everyone describes it. More than likely what will happen is that consumers will become more selective with spending. They will switch to lower cost alternatives. I have a client that operates a nursery and he is telling me that people are spending less money. However, I was at Home Depot over the weekend and I saw some of his same customers there buying plants. Coincidence? People will likely tend to nest more eating more frequently at home and cooking out on the grill. The bottom line is that consumers will give more thought to how money is spent and what it is spent on. The larger the ticket item the more likely it will be that the decision will be put off.

Analysts had been projecting that LCD television sales would skyrocket this holiday season but that is a rather big ticket item. So what if instead they bought an iPod or a new video iPod? Instead of Foleys they might shop Target for clothes or possibly Wal-Mart. Dad might get that new grill he has had his eye for Christmas.

Personally, I am expecting that as refining capacity comes back on line that the price of gas at the pump will settle down a little. Then the consumer will start feeling a little better about there situation and we will still have a decent holiday season. I think people want to forget about the misery that this most recent year has brought. The heating bills for the coldest part of the season won't start arriving until January and by then the Christmas money will be long spent.

The bottom line is that wages and prices are going to have to eventually rise. Probably prices first and then wages. I think the real problem that American's are having is a lack of confidence in the leadership. In times of crisis American's look to their leaders for guidance and right now we are not getting it. America is still the greatest country in the world; sometimes we just need to be reminded of that.

JMHO

FB Out!

The bottom line is that wages and prices are going to have to eventually rise. Probably prices first and then wages

I find it highly unlikely that wages rise for the masses.
In fact I bet they fall.
Perhaps wages rise at Walmart, but perhaps we have a bunch of carpenters working at walmart when the housing slump kicks in full swing.

Are incomes of real estate agents headed up or down?
What about incomes at GM and delphi?

Bottom line:
wages and prices will both eventually fall.
DEFLATION

Mish

The poor eat more meats in this country. Just lower quality meats , Chuck, Chicken wings, Hot Dogs, Bologna etc. Just about as cheap as bread.

The bottom line is USA is spiralling down economically...so what is new? Our days of pre-eminence is over. 30 years ago I was in New Orleans. There, the poor was about 5 to 7 percent. Now, hurricane Katrina showed us to be 25% poor. As more middle class fall into the poor category, the government will find a way to tax more like taking away healthcare and mortgage interest rates. The sales tax will go up. If gasoline price goes up any further, as some wants them to be, this would be the worst Christmas season for the retailers.

Yes, this would hit China hard. But they already know that. So they are actively selling their stuff in other countries to replace our middle class. Yes, we consume too much, but cutting off suddenly like certain drugs could cause an economic stroke.

Mish-

I must politely disagree. Energy and commodities are pushing costs up. Eventually prices will be forced up. The only way prices are coming down is if we have a global downturn.

FB

The bottom line is USA is spiralling down economically...so what is new? Our days of pre-eminence is over. 30 years ago I was in New Orleans. There, the poor was about 5 to 7 percent. Now, hurricane Katrina showed us to be 25% poor. As more middle class fall into the poor category, the government will find a way to tax more like taking away healthcare and mortgage interest rates. The sales tax will go up. If gasoline price goes up any further, as some wants them to be, this would be the worst Christmas season for the retailers.


Economic fortunes of businesses and countries are not stable. They may be exactly be cyclical, but they will change over time. Remember when the Roman Empire was the "greatest" and largest nation? They had some very advanced "technology" for their time.

I do feel that we need to take a look at our position in the world economy. We used to practically own it all. Now the only two real US car manufacturers we have left (GM & Ford) may not last another 10 years.

The saddest part of all of this is that I believed in education (I have a master's degree). I am smart and capable, but I live in a college town. It seems everyone has a Master's degree, and there are so many PhD's... so my education and experience get me a salary that I can't live on with my two daughters.

Someone posted that they have so many jeans, they have to give tons away each year. Wow, that must be nice. Well, my daughters each own 4 pair, and only one pair of shoes (a pair of sneakers because they have physical ed). I haven't bought a new pair of shoes in at least 2 years. We don't go out to eat, we really don't have many luxuries. When things get tight, the cable gets cut off, and the phone too. That's pretty degrading to be driving a 10 year old car, have your phone disconnected, AND have a Master's degree. And I know how to pinch a penny...

I don't even consider myself middle class, although my income (the only one for our household) would say I'm "middle class".

I think this kind of trend will be here for some time. We have become a service-based country. If we don't "make" anything, we have nothing to sell to anyone. We may have alot of intelligent people and consulting may be something we can do...but the new up and coming countries will learn from us, and then they won't need our "knowledge". Besides, living in the college town that I do...I would say that over 1/2 of my neighborhood consists of foreign students. Mostly from Asian countries. How they can afford to come and buy a house is beyond me!

Just my two cents (which I squeezed out of only one penny). T

This discussion is a sign of temporary market bottom. I'm looking forward to more 'doomsday' forecasts by you guys.

Assume the steer is slaughtered at age 18 months, and 5,214 gallons gives an average of only 9.5 gallons per day

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I would venture to guess that a steer can produce more than 1 pound of beef. You might want to check your math, you have calculated gallons of water per steer, not gallons of water per pound of beef...


"Producing 1 pound of beef requires 5,214 gallons of water."
</I)

The only way prices are coming down is if we have a global downturn.

Like that's not likely
Please
Even IF some commodity prices keep rising nothing says wages have to follow.

Plot the CRB with wage growth for us and post the chart.

Mish

What about incomes at GM and delphi?
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Good, typical, example! Three-way talks are now in progress (Delphi/GM/UAW), to devise means and way how to wipe out billions off Delphi's books - wages, benefits, pensions. With declaration of bankruptcy it should be a slam-dunk, ... a la airlines, steel, et al. Obligations will be unloaded, largely, upon the fed programme, ... which, btw, is grossly underfunded, too, ... and only pays out partially as I understand.

Bottom line:

Wages are falling already! Prices will follow. fwiw.

C.

This discussion is a sign of temporary market bottom. I'm looking forward to more 'doomsday' forecasts by you guys.</i<

You are welcome.
BTW do yourself a favor an see what posts here looked like and what we were talking about some 70 SPX points higher. I bet it was the same thing.

If you think there is any special talk today or even during this decline, you are dead wrong. I did not see a single gloat by any bear here.

Mish

This discussion is a sign of temporary market bottom. I'm looking forward to more 'doomsday' forecasts by you guys.

Retail sales and consumer confindence are weaker than expected further waking investors up to the fact that the consumer, which is the golden goose in this goldilocks economy, is going to be slaughtered by Thanksgiving and the Dow pukes at least 2% tomorrow.

BTW, Refco is not helping in the extreme.

This discussion is a sign of temporary market bottom

The fact that this discussion made the hot topics list (and brought in some of those who don't usually read this board) may be the sign you are looking for. Stay tuned.

Adenovir

There were several messages that said people would switch from meat to grains. Nonsense. People will cut food costs first by eating out less.

Switching from meat to grain won't happen on a large scale partly because 100 calories from hamburger costs less than 100 calories from apples and partly because that would mean everyone would have to learn to cook all over again.

This thread hits upon three factors that I heard an analyst mention:

Abundance
Asia
Automation

Abundance - clearly we have much stuff; maybe so much that we rest on laurels rather than move forward. How else do we explain the "stuff" garnering TV air time?

Asia - high quality, educated workforce willing and able to provide excellent services at a fraction of the cost of US services. Amazingly enough (and this scares the heck out of me), a neighbor of mine, an engineering manager for Rayethon whom have a great deal of respect for, has CHOSEN TO SEND HIS KIDS TO INDIA FOR SECONDARY SCHOOL because they can get a much better education there. Ouch! Like wake me up or beam me up or something...

Automation - Anything routine - repetitive tasks, accounting, providing information or data, mechanical - will be done by machines. IBM's mantra - "Machines Work, People Think" - is being realized.

Combine these three things with consumption and wars financed by borrowing from Asia, and we be in a heap 'o something smelly, partner.

Ak...

Sorry if I'm getting off topic here a bit, but this is quite a simplification. We would be exchanging one set of morbidities for another. For example, the rates of stomach cancer are sky high in countries that have a mostly grain-based diet.

In addition, I don't really agree that diabetes rates would go down with more grain comsumption, I believe its the large amounts of processed carbohydrates (not meat) that contributes to our obesity and diabetes epidemics. There is more obesity and type II diabetes among the lower-income segements of our population than the middle and upper segments. Who do you think eats more meat?

I agree with this 100%. To take it a bit further off-topic, a main reason that processed grains (mostly wheat and corn or corn syrup) are cheap is that these agribusinesses hog the majority of the government subsidies. Fresh fruit and vegetables get very little assistance therefore are relatively more expensive at the store. The government tells us to eat healthy, but uses our tax money to supplement bad foods.

steross

<< That's pretty degrading to be driving a 10 year old car, have your phone disconnected, AND have a Master's degree. >>

There's nothing degrading about any of that. You have worked hard to get that Master's degree, not to mention keeping a car running for 10 years. And how many people do you really want to talk to on the phone anyway? A thoughtful letter (or email) can get the job done. Be proud of your LBYM ways, T! And don't forget to tell your daughters how much you love them.

J
280,000 miles on my beater and loving it!

That's pretty degrading to be driving a 10 year old car, have your phone disconnected, AND have a Master's degree. And I know how to pinch a penny...

I drive a 13 year old BMW 5-series. It's got 155,000 miles on it. I plan to drive it for as long as I can. I have never felt the need for a "new" car. In fact, my "old" car is better than 99% of peoples' brand new cars. Plus it looks bling.

I am about to disconnect my phone (my land line) as I just got a cell so I guess that doesn't count. But I dont have cable. Gave up TV as a New Years Resolution 3 years ago and my quality of life upped dramatically when I did.

I have a Bachelor of Commerce so I don't have a Master's degree. I don't want or need one. I'm working as a marketing manager at what is arguable the BEST Fortune 500 company in marketing. A few more years of this and imo it's better than an MBA in Marketing and I think that that prospective employers would view this experience as such. Don't care to spend my life in school pretending to do things. I'm doing real things now and that's all that matters.

But the point is, I don't see what's wrong with keeping a car for longer than 3 years. Why do people have such a stigma towards it? I don't get it. Do you get AIDS or something if you keep a car longer than a lease period?!

That being said, when it does come time to replace that car, I'll be looking at a BMW 3-series, probably a 2-3 year old model, which I'll drive for as long as possible once again.

AlaskaSteve where in Alaska are you from?

Mish

<I don't really agree that diabetes rates would go down with more grain comsumption, I believe its the large amounts of processed carbohydrates (not meat) that contributes to our obesity and diabetes epidemics. >

Two months ago I gave up animal based food. If it had a fact I don't eat it. I will occasionally cheat with some sushi, and a pizza with minimal cheese. I'm eating more carbohydrates than ever. Absolutely without trying, I've lost weight. You might want to reconsider the Atkins theory.

An intelligent and thought-provoking post, as witnessed by the number of replies (most equally thought-provoking). However, to me, this sounds much like the theories of the late 80's that said the Japanese were soon going to own all the land in the U.S., then the sky would fall or something.

My take is: who cares how rich or poor the country you live in is? We are all going to die eventually.

There are Hondurans who make something like $2000 US per year that are happier than pigs in shit because they accept that and, in between birth and death, do the best they can with what they have. That's what we'd do here in the U.S. if we wake up tomorrow and find China or India or Madagascar is the new 'world superpower'.

Junk cannot make you happy or sad, except temporarily. Do you think we're happier here than we were before GameBoys and iPods and plasma TV's?

-J

An intelligent and thought-provoking post, as witnessed by the number of replies (most equally thought-provoking).

Thanks.


However, to me, this sounds much like the theories of the late 80's that said the Japanese were soon going to own all the land in the U.S., then the sky would fall or something.

To anyone who did the math then, it was an absurd conclusion. Do the math now, however, and you find an alarming similar conclusion: Foreign official holdings of Agency debt held at the Fed are up to $380 Billion. Total mortgage backed securities held by foreign investors are probably well over $1,000,000,000,000. While these investors don't actually own the land right now, they may soon own a lot of it if the squeeze wipes out enough mortgages and the GSEs go under. Whether or not they "own" the land now or in the future, foreign investors have financed the housing bubble to the tune of $1T+. Americans are sending their mortgage interest payments oversees right now, and many of them may soon be sending their rent overseas if they are squeezed into default.


My take is: who cares how rich or poor the country you live in is? We are all going to die eventually.

Generally speaking, you are more likely to die sooner in a poor country. Happiness is a state of mind, and you have final say over what goes through your own mind, but it's a lot easier to be happier if your basic needs are met and you don't have nasty external forces constantly raining on your parade.


There are Hondurans who make something like $2000 US per year that are happier than pigs in shit because they accept that and, in between birth and death, do the best they can with what they have. That's what we'd do here in the U.S. if we wake up tomorrow and find China or India or Madagascar is the new 'world superpower'.

That would be nice, but somehow I think the adjustment period will be a lot tougher than that. Suicide, divorce and other broad measures correlate heavily with financial stress, and the squeeze creates a great deal of stress.


Junk cannot make you happy or sad, except temporarily. Do you think we're happier here than we were before GameBoys and iPods and plasma TV's?

I don't think we're happier, but that's because the world has gotten more complicated and difficult, not because of the conveniences. Part of the problem is the lust for all the things people see but can't afford. But families were probably much happier in general, when one parent could stay home and getting a first TV set was a huge event. Now in most middle class families two working parents is the norm and the financial stress of struggling to pay the bills is a daily drag. As more and more people fall behind on their payments, I think quality of life.

Opposing opinions certainlly welcome.

Rodg

There are Hondurans who make something like $2000 US per year that are happier than pigs in shit because they accept that and, in between birth and death, do the best they can with what they have. That's what we'd do here in the U.S. if we wake up tomorrow and find China or India or Madagascar is the new 'world superpower'.

Junk cannot make you happy or sad, except temporarily. Do you think we're happier here than we were before GameBoys and iPods and plasma TV's?

The US is not culturally or socially geared for a lot of destitute people to be wandering around.

Personally I wouldn't mind it much. A lot of people might find that a simpler life was more rewarding. The adjustment would be violent though.

Here's a story about a guy who toured the country on motorcycle for over 2 months on $751 he found in a mud puddle :

http://www.the751.tri-pixel.com/

May I email you? I've had a heckuva time trying to add veggie dishes to our repertoire. Would like very much to ask you questions about nutrition/cooking/recipes/shopping....

Good for you Kestral. My Jeep Grand Cherokee is 1994 with only 100,000+ miles. It's well maintained and low mileage because I work at home. I plan to keep it for another 100k miles for 2 reasons. (1) It's a great ride, goes off road, goes in the snow, hauls the "junk" I need from Lowes or Home Depot. (2) New cars are not worth it.

We just sold my wife's mini van. It was only 9 years old, but had high mileage (200,000+) since she works 15 miles from home. But we went with a 1 year old Toyota Avalon and saved about 10 grand over the new model.

If it was up to me, I would rather ride my bike anyway. I take it always if I don't need to carry more than I can fit in a backpack.

People are way to hung up having a new car. Their only purpose is to get you somewhere. I wish all cities had better mass transportation. Less driving. Less pollution. Less expense. Less gridlock. Better life.

Just MHO.

I will miss the van, however, on trips to the coast. But we could always rent one for a week when we go.

CE

Interesting reading until I got to the point where the author exposes himself:

"there is little doubt that wealthy Republican supporters have been spared much of the pain"
"Meanwhile, working class and poor Americans have been taking on a disproportionate share of the pain"
"political change is possible if there is enough outrage over declining living standards for middle and working class families."
"Whether or not the political focus shifts to providing a better safety net for the poor while raising taxes on the wealthy"

My recommendations:
1. He should move to Europe - perhaps France or Germany where he can enjoy the the Socialist ideals that are much further developed in the government.
2. My country, the USA, is based on Liberty - not socialism.
3. Study history - the failure of the Soviets, the ongoing transition in China, and the financial advances in the USA from the 60s/70s to the 80s, when President Reagan finally had the courage to stay the course and get us off many price controls and other socialist policies that were crippling our economy.

Sincerely,
A soldier currently serving in Iraq.

nteresting reading until I got to the point where the author exposes himself:"there is little doubt that wealthy Republican supporters have been spared much of the pain"...

"Whether or not the political focus shifts to providing a better safety net for the poor while raising taxes on the wealthy"


Hi EDG, thanks for sharing your response.

I was trying to be objective and and stay politically neutral because I felt the topic was extremely important and wanted to avoid a breakdown into political flaming. I wasn't trying to say that the Republican, Democratic, Socialistic way of handling what lies ahead would be better, only that the impact on the middle class would be essentially the same whether the rich or the poor were protected more by government policy. The main point of that part is that a decline in the level of consumption can't be avoided.

The bigger point of the whole piece, which I'd like to re-emphasize, is that many of the trends and developments we are seing today make much more sense when viewed with an understanding of the middle class squeeze and the global shift in consumption and economic strength. Whether it be inflation in the US, the housing bubble, the National Debt, Middle Eastern conflicts or the performance of the financial markets, the middle class squeeze is exerting an influence. Understanding this can hopefully provide valuable insights.

Most people seem to think I did a decent job of making my case. Perhaps bringing politics into it at all was an invitation for some people to take offense and reject the message.


My recommendations:
1. He should move to Europe - perhaps France or Germany where he can enjoy the the Socialist ideals that are much further developed in the government.
2. My country, the USA, is based on Liberty - not socialism.
3. Study history - the failure of the Soviets, the ongoing transition in China, and the financial advances in the USA from the 60s/70s to the 80s, when President Reagan finally had the courage to stay the course and get us off many price controls and other socialist policies that were crippling our economy.

1. With family, friends and a job I love in sunny California, I'm quite happy here.
2. The US is far more socialistic than you might want to believe, but that was the topic of many other threads on this board. And what the US is "based" on is open to debate (open debate being one of the many things I personally think the US is based on).
3. I have studied history (which is of course very subjective) and have a very different impression of the Reagan's economic policies than yours:

http://boards.fool.com/Message.asp?mid=20884620&sort=use...

(I'm wandering off topic, by mentioning it, but I think that too was an important post for people who missed or have forgotten it.)


Sincerely,
A soldier currently serving in Iraq.

I wish you a safe, and speedy return home.

My recommendations:
1. He should move to Europe - perhaps France or Germany where he can enjoy the the Socialist ideals that are much further developed in the government.
2. My country, the USA, is based on Liberty - not socialism.........


Sincerely,
A soldier currently serving in Iraq.

I find this message quite ironic. Consider the military safety nets of completely free health care, provided food and housing, and extra pay for larger families. The largest institution with tendencies toward socialism in the US is the military in which you serve.

steross, formerly a soldier that served in the Iraq war.

2. My country, the USA, is based on Liberty - not socialism.

It was FOUNDED on liberty, it is most surely not based on Liberty.


3. Study history - the failure of the Soviets, the ongoing transition in China, and the financial advances in the USA from the 60s/70s to the 80s, when President Reagan finally had the courage to stay the course and get us off many price controls and other socialist policies that were crippling our economy.

You just have not payed that price yet. But you will, liberty or not, there is no free lunch.

Best,
Rien.

Two months ago I gave up animal based food. If it had a fact I don't eat it. I will occasionally cheat with some sushi, and a pizza with minimal cheese. I'm eating more carbohydrates than ever. Absolutely without trying, I've lost weight. You might want to reconsider the Atkins theory.

Imshaken,

Congratulations on your weight loss. I suspect though, that you weight loss is due to the same reason that Atkins worked, briefly at least. At the time someone starts a radical diet change, you by definition think about what you are eating. This extra consideration and thought to what you put in your mouth makes most eat healthier, and less. It is the mindless eating that is so easy to do that gets most people.

steross

country was founded by the free masons


ever look at the dollar bill?

guess who is a mason???

W is a mason
Kerry is a mason

both skull and bones at Yale


Masons from day one to the present

one huge Masonic Lodge in DC


he who has the power...keeps the power


demopublicans and republicrats both

Masonic masononians masonacrats all

tr

demopublicans and republicrats both

Masonic masononians masonacrats all

I just have one question, when will these putzes get moiled?

The US was founded way before the dollar bill came into existence.

Maybe the founders were mason's, I don't know. But it does not look likely.

Best,
Rien.

Hi steross,

I find this message quite ironic. Consider the military safety nets of completely free health care, provided food and housing, and extra pay for larger families. The largest institution with tendencies toward socialism in the US is the military in which you serve.

The U.S. military is an EMPLOYER, and the benefits you mentioned aren't socialistic government entitlements, they are government compensation to the employees of the military.

BIG difference from socialism where you penalize the productive in order to reward the unproductive.

steross, formerly a soldier that served in the Iraq war.

You took on VERY significant risk to life and family on behalf of your employer, our country. I personally thank you for your work!

The military benefits you receive and are due were earned... they aren't handouts.

Cheers,
Dave

<< That's pretty degrading to be driving a 10 year old car, have your phone disconnected, AND have a Master's degree. >>

There's nothing degrading about any of that. You have worked hard to get that Master's degree, not to mention keeping a car running for 10 years. And how many people do you really want to talk to on the phone anyway? A thoughtful letter (or email) can get the job done. Be proud of your LBYM ways, T! And don't forget to tell your daughters how much you love them.

J
280,000 miles on my beater and loving it!
----------------------------------------------

It is never a crime to be poor. Although we were able to buy a new car, we chose to buy an old, used car for $4,000 about two years ago. We change oil every 2,000 miles and take it to the mechanic for general upkeep. You only need one pair of shoes. Go to re-sale shops in better neighborhoods or the goodwill for items of clothing. If you meet someone who looks down upon you because of your lack of wealth, it is a testament to their bad character. There was a time when I had to decide if I could afford to buy dishwashing liquid for 39 cents. I was that broke and charged everything. I hunkered down, got out of debt and saved to buy my own home. Lived without TV and listened to radio mysteries or read alot of books as an experiment; decided I liked TV but didn't need it to live this life. Your children are your wealth. Give them lots of love, and you'll reap rewards the rest of your life.

Set a goal in life and you will achieve it if you work for it. It won't happen immediately, but you will realize that the work was more fun than the achievement. There isn't much that you need in this life besides food and a roof over your head. Don't believe the hype that you "deserve" that trip or that new car. That saying, "He who dies with the most toys, wins," is hogwash. He's dead and couldn't take it with him. LOL. He who dies with love in his heart and loved ones at his side is the one who wins.

Best of luck to you and your familty.

Regards,

Levka.

we can only my friend

only wish!!!!!!!!!

tr

Jefferson
Washington

and all the rest

were FREE MASONS

go check it out...I never lie..even when I lie

me and Scarface,,,,we went to different schools together


Masons rule!!!!!!!!!

tr

when will these putzes get moiled? "


that's very hard to day....because " ven de putz schtect,licht bain sachel en dread"...which is not a plesant thing to consider...off to the friday night ritual....all the sushi I can eat,,and all the hot sake I can swill


Ichibahn!!!

tr

The U.S. military is an EMPLOYER, and the benefits you mentioned aren't socialistic government entitlements, they are government compensation to the employees of the military.


Sorry Dave, you are splitting hairs here. The government could easily put military families on the same insurance plan that other federal workers families are on. The government could easily pay military members for the work they do without compensating those with families more. They did not. I did not say this is pure socialism. I said tendencies toward it. Sure, you have to be employed to get this socialistic safety net. But that is what it is.

BIG difference from socialism where you penalize the productive in order to reward the unproductive.

If you do not think this happens in the military, you have not been in the military. Where do you think the acronym ROAD (retired on active duty) came from? How often do you see someone fired from the military that did not do something illegal or grossly negligent? It is a several million person microcosm in the US with socialist tendencies.

I'm not arguing for or against this. Just trying to call a spade a spade. FoolEDG's arguement reminded me of the farmers and ranchers that want the government off their backs for conservation issues, but more than happily accept the reduced rates for grazing fees and subsidies the government gives. Our citizens hate "socialism". That is, socialism that does not help them personally.

steross

Hi RogerRafter,


You stated the american military is losing strength. What evidence do you have of that? I agree we are less effective at 21st century warfare when politics must be considered, but if necessary, the use of carpet air power bombing and nukes - we have not lost any strength. I am speaking from my experience as a design enigneer and have worked on secret military projects with a secret clearance. Perhaps we are losing "relative" strength compared to other countries, as other countries gain nukes.

You stated the wealthy people consume more. I respond this is simply not true. Each individiual can only consume a limited amount of actual resources. Most of what wealthy people own, is not used or used little.. They have land, ranches,etc. which does not become sprawl and shopping malls. If it was given away to poor and middle class and gave them a regular food supply, the result in 20 years would be yet more sprawl and development, and then people complaining "What happened to all the resources? Why is everything so expensive?" Additionally there is many many middle class and poor. They consume the vast majority of the resources, when looked at in whole. Think of it as a swarm of locusts compared to a small group of deer and a couple of elks tossed in. What eats more vegetation? The swarm of locusts because there are so many.

Lastly, you imply that if the political winds change for the better, a safety net could be provided for the poor and middle classes. I disagree. Many believe it is politicians fault, or they could wave a wand change the policies, and bam! suddendly everyone would be able to afford a crown tooth repair in their mouth, drink great wine, and drive a mercedes. Wrong.
Here is the facts: Westerners are used to an abnormally high standard of living and consumption due to irregular imbalances that are beginning to rebalance now. There is excess resourses available currently, and the population is rising and people running into the USA as a result. As it gets more crowded everywhere, each person can have less natural resourses. How is this manifested? The price goes up and you and I can't buy as much food, house, oil, etc. The bottom line is when resources are short enough the population growth will trim off. Unfortunately people without resources (most of the middle class) are still having kids.

Twice as many people in the future with the same amount of oil in the ground equals half as much oil for each person. It's that simple.

If the worlds population leveled off right now and then started going downwards slowly to trim and level off to 1 billion, the price of land and food would be a lot more affordable to the "average joes" worldwide. Plenty of land to hunt on, fish, beaches, etc. widely available. Instead the average joes worldwide choose to have children, shooting up the worlds population, and those next generations of people are be forced to fight over the remaining fixed amount of non-renewable resources. And the general population who has chosen to have kids blame their predicament on politicians and the wealthy, because they can't look in the mirror at themselves.

Interesting post. Though I agree with the overall trend you have illuminated, I question some of your statements. Namely your assertion that the military is weakening. My observation is that while overextended, the US Military is well-suited to tackle the challenges of the near future. Or, at the very least, fend off any attacks from competing nations. While the size of our military has been reduced, the speed and efficacy has been improved via technological advances. Ultimately, with a nuclear arsenal equipped to blow the world up 100 times over, I see the no weakness in the country's military strength.

Another statement that dimished the value of the post for me was your comment about "...Republican supporters being spared much of the pain..." Seems you've got this half-right. The politcal pork game is a bipartisan dibacle. Shouldering the blame on one side or the other discredits your research and polarizes you audience. WHile the end conclusion might still ring true, to offer this post as an article I think you should be more objective.

Otherwise, I don't think anyone would be surprised by your thesis. America has an insatiable appetite and, unless it volutarily changes its habits, the country will be forced into more Iraq's to satiate its wants.

The government could easily put military families on the same insurance plan that other federal workers families are on.

Sign me up. Real doctors would be nice for a change.

The government could easily pay military members for the work they do without compensating those with families more.

It's not much, but steross is correct.

How often do you see someone fired from the military that did not do something illegal or grossly negligent?

Last time I checked about 140,000 were laid off between 1991 and 1994. I also have the pleasant task of ranking all of the most junior officers in my unit and probably about a 3rd of them are going to be fired within the next year. In addition, steross forgot to mention high year of tenure rules which means if you do not progress through certain ranks by a certain time period...c/ya later. In addition, anyone forced out before retirement eligibility under high year of tenure rules get a nice piece of cloth with some metal alloy at the bottom for their severance pay. GSA price: About $4.75


Actually, what is frightening to me is that the government keeps tapping the military for just about everything. Two concerns for me. Erosion of civilian control of the military over time. Ineffectiveness of other organs in the govt that drives politicians to keep tossing things our way. THIS is not healthy for democracy.

>>How often do you see someone fired from the military that did not do something illegal or grossly negligent? <<

How many are fired each year for being gay? How many articles have we seen in the last couple years about how short handed the military is, yet even people in highly skilled, in demand positions, who are as patriotic as anyone else, love their country and want to serve are discharged for their sexual preference.

Steve

The bottom line is consumption and population are rising because there is excess resources currently available. As the increasing demand bumps up against a fixed ceiling of (limited amount of non-renewable resources), people will (and are) experiencing shortages which are manifested as price increases, or phrased another way "decline of purchasing power".

These middle and low class common people (us including me) who make up the vast majority of the population and the population increase, create the increased demand by having children and consuming more. As the population rises, there is equally proportionally less of any fixed resource for each individual person.

Then this same group of commoners blames a few politicians and the wealthy tiny minority when the resources are futher subdivided by the increased population. It's idiocy at it's finest. Its liberal thinking at it's worst with absolutely no logic to back it up. Its jealousy and regret that you didn't use restraint instead of having that 3rd or 4th kid that you now can't really afford. WAKE UP PEOPLE!!! Use birth control and quit using gas hog SUV's that you have borrowed money to drive -- that you don't even own, the bank even owns the title of that dumb SUV!! How dare you blame George Bush for your lame predicament. Free market capitalism has provided you with the easy life you have.

People through out history have proven a will to live and grow under a lot more "inhuman" conditions that americans are currently experiencing as a result of their medical copayment increases. Therefore I recommend you:
1: Only have kids if you are absolutely sure you can provide advantages for that kid to get a decent life and a piece of property for him/ her to live on.

2: Save as much cash as you can and be prepared to live more frugally in the future.

The U.S. military is an EMPLOYER, and the benefits you mentioned aren't socialistic government entitlements, they are government compensation to the employees of the military.

BIG difference from socialism where you penalize the productive in order to reward the unproductive.

Your tax money and my tax money is going towards BOTH entitlements AND the military. This tax money could have gone to the more productive instead of paying for entitlements OR the military. Fact is that BOTH the military and entitlements take away resources from other facets of our society.

I find this message quite ironic.

Home run. Never met a lifer yet that could hack it on his own.

Economic fortunes of businesses and countries are not stable. They may be exactly be cyclical, but they will change over time. Remember when the Roman Empire was the "greatest" and largest nation? They had some very advanced "technology" for their time.
- Tish101

Yes, that is the problem. Somewhere I read (Tipping Point?)that our government is full of half-smart people. That is why they do half-arsed jobs as evident from the management of Iraq to Katrina to Rita.

It is politically incorrect to say this. But the reality is that when things were going good and the smart technologists were busy inventing and producing stuff, the half-brained people were smart enough to conive their way into the upper management positions due to their jock appearance while the nerds toiled the lab or production facility. Over 30 years, these half-brained jocks controlled every decision making and spent their time having fun. So, now, when we really need them like FEMA, they have no clue what to do. Here is what I posted in another site:

http://www.alwayson-network.com/comments.php?id=11964_0_4_0_...

The very same thing happened to India and China some 2000 years ago. It took a long time and new generations of people to boot strap themselves. I am not sure, if there is a solution. That is because, we lost our merit culture. There are so many gatekeepers between new ideas and the decision makers that it is impossible to connect them. So, now, we are sending our ideas to foreign countries and they welcome them.

Presently I am working with a progressive African country that wants to develop their economy. We have $500 million worth product and service needs that we may look to China, and India because our large Chamber of Commerce groups are not interested.

Automation - Anything routine - repetitive tasks, accounting, providing information or data, mechanical - will be done by machines. IBM's mantra - "Machines Work, People Think" - is being realized.

Machines do work....but people are forgetting to think! :-)

Hi ggiovani,

Your tax money and my tax money is going towards BOTH entitlements AND the military. This tax money could have gone to the more productive instead of paying for entitlements OR the military.

Kind of silly to "take" taxes from the productive only to "give" them back to the productive... why note leave them there in the first place (without the "haircut" costs of government's re-transference)?

As for the military consuming them in the alternative, I would propose that we have appear to be massively over-consuming military services. As to whether the current commitments are worthy or not, we will truly only know in retrospect (as with the Vietnam actions.)

Fact is that BOTH the military and entitlements take away resources from other facets of our society.

Agreed.

Cheers,
Dave

Hi steross,

Sorry Dave, you are splitting hairs here.

Don't get why you are apologizing... not really necessary, though acknowledged.

I see a fairly bright line difference between the military treatment of it's internal employees who have voluntarily chosen to participate, versus the involuntary treatment of citizens within a country being affected by socialism.

Seems that in order to "split hairs" you'd have to be speaking from the basis that being born as a U.S. (or another country) citizen is a choice... which is a very esoteric position to propose.

The military may be huge, and may be funded by involuntarily collected tax funds... but it is a purposeful and (at least semi)functional enterprise with voluntary enlistment and participation. Virtually NO employmer is without a skew of resource distribution... and socialism is actually quite functional in smaller community units, where all participants are personally known or knownable, after all.

Socialism in a community that has grown beyond it's participants having an emotional connection to each other has proven grandly, time and again, to be irreversably impotent and counter-effective.

Cheers,
Dave

"Fact is that BOTH the military and entitlements take away resources from other facets of our society."

Yup... get rid of all those military folks and we'd have a lot fewer things to worry about...

Just my view of things,

Ken ( May God bless those who serve....)

Thoughtful article, Rodger. If you are spiffing it up to use as an article, take a look at paragraph four, and change "there" to "their."

"as there people have been in control"

:)
Zuzu

My observation is that while overextended, the US Military is well-suited to tackle the challenges of the near future. Or, at the very least, fend off any attacks from competing nations.

You miss the point. The U.S. military is well able to fend off attacks from other nations. If all the army, air force and navy were disbanded tomorrow, the U.S. national guard would still be able to fend off attack from other nations. Not that I see any nation that covets U.S. territory.

As for nuclear weapons, four ICBMs and three nuclear submarines can pack all the fire you would need to deter any nuclear power from using nukes against the U.S.

The U.S. military isn't designed for defense and is rather useless for defense. It is an organization whose job is to project U.S. power across the globe and coerce other nations to serve the interests of Washington.

Given this mission statement, there are clear signs the U.S. military IS weakening. The major reasons: overextension, spread of weapons, rise of militant Islam, the bankrupcy of the U.S. public high-school, institutional ossification, and more.

Nevertheless, the U.S. military will not be defeated in battle, it will be financially exhausted. The U.S. military costs a fortune. The cost is justified (economically, not morally) as long as coercing other nations to serve Washington's interest payes itself. When the military fails to cover its costs by securing foreign resources, Washington is left holding the bag.

Regards,
Capitanfracassa

The U.S. military costs a fortune. The cost is justified (economically, not morally) as long as coercing other nations to serve Washington's interest payes itself.


That depends. Ill-conceived military adventures elsewhere result in a large cost in terms of lost good will.

What goes around may accrue over many years but comes around... eventually.

That depends. Ill-conceived military adventures elsewhere result in a large cost in terms of lost good will.

What goes around may accrue over many years but comes around... eventually.

Of course, but the gains are private, whereas the costs you mentionned are easily dumped on taxpayers. Worse, the loss of good will and the "coming around" of hatred is used to justify even bigger wars. I am not making an argument in favor of militarism. I am simply predicitng that the U.S. army will keep fighting until it runs out of money.

Regards,
Capitanfracassa

Switching from meat to grain won't happen on a large scale partly because 100 calories from hamburger costs less than 100 calories from apples and partly because that would mean everyone would have to learn to cook all over again.

Far more likely is that we'll make that meat go further like your Grandma did - Meatloaf, not steak (cut it with bread crumbs & fillers), goulash (burger with lots of pasta stirred in), spaghetti, stir-fry, Stew - meat as a flavoring, not the main course.

I once worked for 2.5 years in a Chineese restaurant - I got so used to eating quasi-vegetarian that the thought of a big, bloody steak actually became repulsive to me after awhile. Of course, once I quit I eventually reverted to the American Way of eating....

But if a meat-lover like me could ALMOST become a veggie in just under 3 years, it might not take as much as you think to turn people around...

SG

Read this book and you may decide to become a vegetarian.h

http://www.enotalone.com/books/0804110387.html

"Far more likely is that we'll make that meat go further like your Grandma did - Meatloaf, not steak (cut it with bread crumbs & fillers), goulash (burger with lots of pasta stirred in), spaghetti, stir-fry, Stew - meat as a flavoring, not the main course."

Thanks for the memories ;-) Except it was mom doing the cooking of such dishes...

Also remember mixing the yellow and white cubes to make the margarine look like butter...

Grabbing chunks of ice to suck on that chipped off when the iceman broke off the order size...

Regards, Ken ( Didn't know we were rather poor when I was a kid...)

The vanishing of the middle class is
true and also very worrisome, my first reaction to the
notion of overconsumption is negative since I do not
for a moment believe Americans are overconsuming at
all in comparison to europeans. Over there where nearly everything from soup, bead, pastry to housing gives me the impression of
far outmatching ours. We live in slums and
trailerhomes never seen over there, then we do not
overconsume. The problem is similar to production of
steel, we produce the same quality steel per ton as
the Swedes do but use twice the energy. We spend
twice the money on higher education and produce
semi-illiterates and import intelligence and Nobel
Prize winners. Thus, efficiency and bureaucracies
divorcing themselves from socio-eoconomic realities is
more the issue rather than personal overconsumption and then
one of the major monetary burdens is, of course, the
military and the media never even dares to touch the
first step of all the direct and hidden costs Americans
are paying, and those bills are still falling due at
an ever increasing rate. War financing is always hidden as much as possible by the pols otherwise wars would not last long if the taxpayer had access to its full, direct and immediate costs. Personal overconsumption is not the issue, it is the wrong consumption, to be sure, it is partially involved, among many factors. Also, Bush will probably monitize the war effort as opposed to increase taxes which will inevitably lead to much higher inflation and exeracebate the long term financial picture for all of us.

I can't comment on "overconsumption", but I can identify one source of the "squeeze" that you didn't touch on. Specifically, most of my friends and coworkers are either losing their jobs, or taking huge paycuts in order to keep their jobs.

And I'm talking about professionals with graduate-levels of education and 25-30 years experience in highly specialized fields.

When you say "expenses rising faster than incomes", the inferrence is that incomes are rising, when in fact most Americans I know have seen only paycuts and layoffs and downsizings, year after year after year.

The cheerleaders, Greenspan included, are so sheltered that they actually see inflation clouds, when the reality is that a depression would be triggered overnight if most Americans woke up to how fast their spending power was actually plummeting.

Interesting post, but you make very far reaching assumptions up front without exactly supporting them - "With consumption on the rise in developing nations, and America's financial and military strength on the decline, the level of consumption in the United States is likely to decline substantially in coming years" . While I agree on some level with a financial decline (40% of our debt is now serviced by foreigners, never a good sign), our military is not on the decline by any means. The U.S. on a comparative level maintains the strongest military the world has ever seen. In any case, I disagree with the premise that a weak military always lowers demand. A strong military oftentimes lessens demand, not the other way around. Historically speaking (and recent events aside), a strong military oftentimes keeps nations out of armed conflicts, which provide the impetus for exorbitant consumption. If a nation can keep itself out of wars, consumption remains lower than for those nations trying to sustain themselves through a war. Conversely, if a nation's military is in decline, it may provide an opportunity for an adversary to attack, thus jumpstarting a period of extreme consumption via armed conflict. In any case, I think it's a stretch to assume that a weaker military would automatically reduce consumption.

Also, your article calls out issues, but doesn't necessarily recommend or comment on potential solutions. For example, an estimated $25T (http://finance.yahoo.com/columnist/article/retirement/1382) will be passed along from the baby boomers to their heirs over the coming 20-30 years. How does eventually eliminating the estate tax affect the financial stability of this country? How does the elimination of the estate tax continue the economic polarization in this country and how does that affect policits and social structure, and ultimately consumption? IMHO, the estate tax provides a key to solving a lot of the issues that you raised. If the US taps just a 1/3 of that cash, it could not only pay off the debt, but also reverse the trend of wealth polarization in this country...and in reversing this polarization, we could stave off the myriad of socioeconomic issues stemming from a non-existant middle class.

Either way, appreciate the article and interesting thoughts, but wanted to provide a few alternative approaches to contruct the argument.

Are we any better off today than when the thread started or are we slowly spiralling down....???

Are we any better off today than when the thread started or are we slowly spiralling down....???

There really isn't a we - just you. Are you better off or worse off?

Q: Are we any better off today than when the thread started or are we slowly spiralling down....???

A: <There really isn't a we - just you. Are you better off or worse off?>

<"There really isn't a we" - just you.>

I know the question was well meant. But I suspect thinking along those lines is one of the root causes for the condition we find America today. (I'm not thinking about lack of funding for social programs.)

We the people in order to form a less perfect union say screw everyone and everything else, I'm getting mine now regardless of the consequences. (Sounds familiar. Didn't they use that one the Republican National Convention?)

We the people in order to form a less perfect union say screw everyone and everything else, I'm getting mine now regardless of the consequences. (Sounds familiar. Didn't they use that one the Republican National Convention?)

That is what makes this country strong. One vote per person and we all have our own goals. Many goals overlap and our representatives form laws. The goals are constantly shifting and are updated over time. Many workers voted democrat in the 60s-90s. Did they vote to make other lives better? No, they voted to make their own life better. That's the work.

Andy