The Great Accumulation hits a wall

December 16, 2008 – 3:21 pm

by Rolfe Winkler, CFA

The recession is here and credit is disappearing.  Shopaholics everywhere must now cope with the reality that accumulation is no longer possible at rates of the recent past.  The middle column in yesterday’s WSJ is particularly funny (sad?)…

On Black Friday, the day after Thanksgiving and the first official day of the holiday shopping season, 31-year-old confessed shopaholic Nikki Ebben was holed up in her bedroom in Appleton, Wis., while her husband went to Wal-Mart to snag a $500 flat-screen TV. Ms. Ebben, who has maxed out 15 credit cards and racked up more than $80,000 in debt, says she vowed to stay away from stores. Still, she couldn’t resist the temptation of e-commerce, particularly the appeal of 30% off and free shipping. While her husband was gone, she spent $400 at Toysrus.com and Target.com, using money from the couple’s joint bank account.

“I went crazy,” admits Ms. Ebben, whose mother stopped speaking to her for a time because she owed her parents so much money.

CNBC also has a story about shoppers coping, or not…

In the coming months, mental health experts expect a rise in theft, depression, drug use, anxiety and even violence as consumers confront a harsh new reality and must live within diminished means.

“People start seeing their economic situation change, and it stimulates a sort of survival panic,” said Gaetano Vaccaro, deputy clinical director of Moonview Sanctuary, which treats patients for emotional and behavioral disorders. “When we are in a survival panic, we are prone to really extreme behaviors.”

As a society, we’ve come to define ourselves by the amount of stuff we have.  Look no further than U.S. GDP, two-thirds of which is driven by “consumption.”  The CNBC article notes that politicians encouraged spending in the wake of 9/11 in order to keep the economy going strong.  What happened to patriotism being about sacrifice?

At this point, the conventional wisdom is that the Great Accumulation can’t be allowed to stop.  The economy wouldn’t survive it.  Look at the Detroit bailout.  Economists and politicians everywhere acknowledge that Detroit automakers have made bad decisions, but most argue they must be rescued anyway.  We can’t let them fail because too many jobs would be lost.

But why rescue those jobs?  To what end?  So the U.S. auto industry retains the capacity to build/sell 15 million autos per year?  Annualizing auto sales for November suggests the market for new cars is probably half that now.  Thinking dispassionately about the matter, is it such a terrible thing if Americans buy fewer cars?

  1. 5 Responses to “The Great Accumulation hits a wall”

  2. I have found that few things that i had to have made me happy. If we get to the point where we cant buy the things we need to survive,its going to get very bad,crime and the like!

    By stan stetz on Dec 16, 2008

  3. Your post reminded me of Jimmy Cassandra’s, I mean Carter’s, Crisis of Confidence Speech from 1979, which I’ve listened to a few times in the last week:

    http://www.americanrhetoric.com/speeches/jimmycartercrisisofconfidence.htm

    Check it out and it will resonate in your head for days.

    By Joe on Dec 16, 2008

  4. –> “Peak EVERYTHING”
    except B.S.

    By M. Bezzle. Ment on Dec 17, 2008

  5. Ahh Detroit! What to do. See my latest blog for more information. The destruction of wealth and its impact on investors, psychologically, makes this recession interesting insofar as the choices to be made in the future regarding further nationalization of the health care system. These are very interesting times.

    John H. Kaighn

    Jersey Benefits Advisors

    The Kaighn Report

    By Anonymous on Dec 19, 2008

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