The Devolution of the Consumer Economy

Wednesday, April 6, 2011
By Paul Martin

By Charles Hugh Smith
FinancialSense.com
04/06/2011

The U.S. transformed into consumer economy that is exquisitely sensitive to debt and the costs of servicing credit. In other words: the bill is finally due, Baby.

One of the foundations of modern economics is the belief that insatiable demand for more goods and services is a permanent feature of humanity. This is also the basis of that other foundation of modern economics, the extension of credit so consumers can buy more now than their savings would otherwise allow.

It was a match made in Heaven–insatiable demand and nearly unlimited credit.Want a shiny new car, but have saved no cash? Not a problem. It will only take a modest monthly payment for 5 years (or longer) to indulge your impulse to have a shiny new vehicle to reflect your individual glory and unique personality (never mind the vehicle is mass-produced; it was “customized” just for you).

The “invention” of mass-marketed credit was one of the great innovations of capitalism. In the Depression, my grandfather paid $1 a week toward my Mom’s first bicycle. The town’s shopkeeper extended the credit, took the risk of non-payment and earned the interest.

The Rest…HERE

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