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richardhutnik on 23 September 2011
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mrstickball said:
richardhutnik said:

And looking at the bolded part.  IF you have a situation where consumers were overextended with debt, and they then acquire more money for lower costs, then you won't create new demand.  The end result, when the bills come do, and people fear for their lives that they could be out of work, you have what is going on now.  What is going on now is that growth is very weak, and will remain such.  It is likely this lower levels of demand will be sustained.  It gets down to a lower level, and savings increase.  The problem is then, there is a lack of demand to create new opportunities.  And if banks decide to restock and not lend, you don't even get new ventures launched at all, so consumers can't even see what else they would demand.  There ends up also being a level of despecialization happening, which also impacts things.  The American consumer, for example, decides to simplify and and get less things.  Things unwind.  And in all this, while this is going on, no one is sure what the heck the future holds, which causes even more contraction.

In this, thrift will go up, and you end up having a reshifting of values in society.   I would say that it would be worth studying the values of people who lived through the Great Depression ended up living and what they thought, because that is what one would expect to see out of Americans, and the rest of the world going this place forward.  Seeing people out of work for years, and knowing them, and knowing they are capable, does make one feel they need to stop spending in foolish ways, and figuring out how to pinch pennies.  Pinching pennies now is a trend seen in advertising today.

I agree. That is why its generally a good idea to save money, be thrifty, then spend money wisely. Although you have lower demand, the reality is that the jobs that are created are generally high-value jobs. In our consumerist society, jobs are generally plentiful for lower skilled labor: retail, fast-food, and the like.

My grandma and grandpa lived through the Great Depression, and since I've got older, I've talked to her extensively about it. It really impacted their values and how they managed their money - use it up, wear it out, make do, or do without. They turned off lights every time they left a room, only purchased new clothes when they absolutely needed them, and bought cars only when the last one died. Their family was one-income, and despite that (he worked as a general laborer at a power plant for ~30 years), they retired with approximately $1 million USD in assets.

Thinking about that and the massive growth of wealth and the middle class after WW2 and the depression, it makes a lot of sense. People came out of the Depression with the idea that they must conserve, so they did. When they conserved, they kept their assets, had little use of credit, and therefore kept their monies. Since that generation has passed away, values shifted to rampant consumerism, and now compound interest is wrecking peoples' lives, because they are transfering their wealth to those that loaned them the money. We've seen this through the savings rate plummeting since the 1970's, and eventually collapsed at the same time the housing bubble burst.

I'd imagine that going back to such a society would be difficult, but is needed. My opinion is that (as an American) that other Western societies are far more responsible with their credit, which ensures that the lower and middle class aren't transfering their wealth to the upper class. I know in my own life, I've focused on having as little debt as possible, and its made me pretty wealthy pretty quickly.

I am pretty sure if you took the factors that came after World War II, it led up to the situation that it had, which is probably abnormal and shouldn't be expected.  What you saw was:

* Frugality from being in a depression

* Development of community thrift and conserving in the name of a war effort.

* Large pent up demand coming off a war.

* Destruction of about every single manufacturing base outside of the United States, so America was the manufacturing center of the world.

 

Combine these factors together and you get levels of wealth not seen since, which led up to the 1960s, the Great Society and the belief that just enough government involvement (heck the U.S Government helped to win a World War) and there could be Utopia and no more world problems.  Just keep the tech coming and you will have the Star Trek Federation of Planets utopia (remember that world?) of Gene Roddenbury.  All that got lost in war after war after war.