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The media abounds with prognostications that the rampant consumerism that has fueled the US and other economies has gone South and will not return for quite a while. Some economists celebrate this turn of events as an opportunity to bring more sense to the market. A senior manager at Morgan Stanley, ironically one of the many firms that have been implicated in ramping up levels of spending by inflating assets and reinforcing the belief that the bubble would never break, [wrote]( that this deflation is a good thing because it will bring sense back to the consumer.
> It’s game over for the American consumer. Inflation-adjusted personal consumption expenditures are on track for rare back-to-back quarterly declines in the second half of 2008 at a 3.5 percent average annual rate. There are only four other instances since 1950 when real consumer demand has fallen for two quarters in a row. This is the first occasion when declines in both quarters will have exceeded 3 percent. The current consumption plunge is without precedent in the modern era.
> The good news is that lines should be short for today’s “first shopping day” of the holiday season. The bad news is more daunting: rising unemployment, weakening incomes, falling home values, a declining stock market, record household debt and a horrific credit crunch. But there is a deeper, potentially positive, meaning to all this: Consumers are now abandoning the asset-dependent spending and saving strategies they embraced during the bubbles of the past dozen years and moving back to more prudent income-based lifestyles. . . This is a painful but necessary adjustment.
The real question is, however, “How real is this prudence?” Is it driven by some sort of attitudinal change or simply by the reality that the money is not there and that the family coffers will take some time to fill up again? My sense is that the cultural drivers that combined with the capability to buy more and more goods are still firmly rooted. People still hold deep beliefs that they are defined by what they own. Self-esteem will likely decline, and we will see evidence in the shape of family breakdowns and other social dysfunctions. Until the strongly individualistic core of American culture shifts to recognize the important of community and interpersonal ties, the prudence is likely to evaporate very quickly. Without an effort to use this climactic event to move out of the “having” mode to the “being” mode of human existence, the opportunity for change will quickly pass by.

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