A Critique of the System, or: A Fool and his Money….


Erik Kain

Erik writes about video games at Forbes and politics at Mother Jones. He's the contributor of The League though he hasn't written much here lately. He can be found occasionally composing 140 character cultural analysis on Twitter.

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8 Responses

  1. Avatar Dave says:

    Please understand that my wanting to see the credit markets thaw has nothing to do with wanting to see the sort of credit markets that fueled the spending boom restored. I don’t think that will happen and the declines in consumption will be followed by flat or slow growth as things stabilize.

    Some of what you may want to see may happen naturally as savings rates increase (which they’ll have to do absent another asset bubble).Report

  2. Avatar E.D. Kain says:

    Certainly, Dave. In fact, I’d say probably most of the policy makers and Prez. Obama probably all want to see change – they just want to fix the problem first. My concern is that fixing the problem in this fashion will encourage status quo. Or that’s the way I’m starting to see it, though there is certainly plenty of compelling evidence that I’m wrong.Report

  3. Avatar Rortybomb says:

    I take arguments like Warren’s The Two-Income Trap (and more general ideas about Risk Transfer) that the problem with Americans households isn’t that we are consuming too much out of discretionary income, but that we are spending more on education and health care, and that is pushing us over.

    I appreciate arguments that our current levels of consumption are unsustainable – but I also realize I get food and clothes much, much cheaper than my parents did. (They wore suits, to like the movies!) However my education and health care costs, as well as housing, are bounds above theirs.

    I’m curious as to your reaction to this line of inquiry; if you have mentioned it before, sorry.Report

  4. Avatar E.D. Kain says:

    That’s a very good point, Rortybomb. But then one has to ask, why? Why is education so much more expensive? Why is health care so much more expensive? And beyond that, I don’t completely buy this line because it seems fairly evident that people are buying a lot more toys now than ever before. But certainly the combination doesn’t help – and certainly easy credit and a gradually shrinking middle class also lend to the problem.Report

  5. Avatar Bob says:

    E.D., I’m in no position it say who is right or wrong but I have read and listened to speculation that the current economy could be the equivalent of the Great Depression in changing fundamental attitudes towards spending and debt. I certainly, with you, hope so.

    Re: the call for spending. I’m in good shape financially because I have stayed debt free for many years, I hate debt, always tried to avoid it. So I have started spending, a new 2009 Toyota – the cheapest Camry I could find and paid cash. Eating out more and giving the servers really nice tips. Charities are also getting more of my cash. Salvation Army gets the cash, my local Catholic church, it’s food bank, lots of baby formula and dappers, anything that I figure will help free up whatever money young families have for rent or medical bills. I relate all this not to brag but to say that responsible spending has some virtue at this time.

    President Obama and Yglesias are correct to reminds us that saving may not be the optimal strategy today.Report

  6. Avatar E.D. Kain says:

    Hoarding is certainly not the answer, but most Americans aren’t in the solid position you’re in Bob. Spending should obviously keep happening, but not at the cost of people’s fragile savings. It’s all about the balance.Report

  7. Avatar Bob says:

    Exactly, that is why I said “responsible spending has some virtue at this time.” And a few extra cans of soup can easily be purchased by most folks in this country.Report

  8. Avatar Consumatopia says:

    Spending vs. saving is the wrong way to look at it. Because of exogenous factors (e.g. China) debt was really cheap. And it still is. It made sense to borrow in the Bush years, and, for the moment, it makes sense to borrow now.

    Where we screwed up was not in borrowing money, but in what we spent the money on. The real issue is consumption vs. investment. We should be (and should have been) investing the money on things that will be useful in the future, infrastructure and new technology research, rather than consuming toys/mcmansions/suvs. We should think about the future in physical, technological, ecological terms rather than the illusory thermodynamics-violating economic abstractions we’ve built on top of them.Report