Ghost of Joseph Schumpeter and the second end of the Monthly Payment Consumer - Eric Janszen

[metalman]

Re: Ghost of Joseph Schumpeter and the second end of the Monthly Payment Consumer - Eric Janszen

10 years old! But how many miles and is it Japanese? By a Toyota, they don't go wrong and are good for 20 years and 200,000 miles. You could get embarrassed if you don't drive many miles a year though...

a toyota... nicely broken in at 100k/10 yrs. buy a lexus and at the stupid thing still isn't showing any wear at 100k. keep it for 150k and you feel like a dope giving up a perfectly good car for no money that's 80% of the car you bought 10 yrs before.

same goes for bmw, btw.

not... not... not... saturn.

[vanvaley1]

Re: Ghost of Joseph Schumpeter and the second end of the Monthly Payment Consumer - Eric Janszen

a toyota... nicely broken in at 100k/10 yrs. buy a lexus and at the stupid thing still isn't showing any wear at 100k. keep it for 150k and you feel like a dope giving up a perfectly good car for no money that's 80% of the car you bought 10 yrs before.

same goes for bmw, btw.

not... not... not... saturn.

I have a 1997 runabout Corolla with about 120000+ miles. Had to change tires and windshield wipers. Other than servicing when required by Toyota that's the major expenses. Anybody know of tires that go over 120,000 miles or 'extends' windshield wipers?

[orion]

Re: Ghost of Joseph Schumpeter and the second end of the Monthly Payment Consumer - Eric Janszen

Don't count out new and improved forms of credit. What about the rental or subscription forms of indentured purchasing? Do you "own" a cell phone? I paid $300 for a phone and $120 a month add infinitum to use it. Or "subscription" forms of entertainment. You get the beatles for a dollar a month, forever. I bet some other models can be invented.

Hopefully my fellow citizens will show a deep revulsion for this slavery. I am busy undoing all my lifetime contracts (cutting back cell phones, reviewing cable options). I think Microsoft was trying hard to get in on this gravy train idea just like the anti-virus guys with annual subscriptions. I am switching to Open Office, and other free services.

I also think people will begin to make life simpler, anything to cut down the amount of mail you get, things you belong to, stuff you have to track, etc.

[ricket]

Re: Ghost of Joseph Schumpeter and the second end of the Monthly Payment Consumer - Eric Janszen

10 years old! But how many miles and is it Japanese? By a Toyota, they don't go wrong and are good for 20 years and 200,000 miles. You could get embarrassed if you don't drive many miles a year though...

Ford Ranger, 106k miles and I drive about 1300 miles a month thanks to my commute. Gas mileage is about 17mpg on the highway. It drives good and is definitely a dependable vehicle. Wife drives a Toyota that gets about 31mpg, but she'd be rather irritated if I commandeered it ::thumbs down:: Really, the main point was that in all of these thoughts, I never even considered financing any part of it from a bank. Theyre thieves, practically every single one of them, and I never willingly do business with thieves. It's that simple.

[santafe2]

Re: Ghost of Joseph Schumpeter and the second end of the Monthly Payment Consumer - Eric Janszen

Back to the finance world of the 1950s.

30% deposit minium for house buying

That world lasted a lot longer than you might suspect. Our first house, 1980, required 1/3 down. We weren't yet married and that was a ding on our credit worthiness and the house was 60 years old which didn't help either.

We had savings and we sold everything we had that had value or had a payment attached to it. Our parents lent us half the down payment, we assumed the 1st and we took out a 21% 2nd. Then we worked for a little over a year to pay off the 2nd and after that the family loan. Those 1950s values were, and are, our values. We were both raised that way and we've raised our kids that way.

Those values will be very wide spread in 5 years but reinterpreted by the 30 and 40 something crowd in a different way than we understand it or my kids understand it. I feel fortunate to have been raised by 50s parents who were raised by 30s parents. We're all very cautious. The generation that came of age in the mid 80s has been taught to create value and wealth through debt. I don't feel smart for avoiding the current mess, just lucky enough to have been born in a slice of time where our grandparents could tell us stories about hardship and the importance of family and to have parents that had grown up with that appreciation.

With any luck we'll go back to that world my wife and I faced in 1980 where we sat across a desk from a banker that wanted to know our character and our families as much as our ability to pay...but as usual, I dream.

[santafe2]

Re: Ghost of Joseph Schumpeter and the second end of the Monthly Payment Consumer - Eric Janszen

Ford Ranger, 106k miles...

My daily commuter is a 4 year old Fisher. I gave up the hard tail original after 22 years and a few crashes that proved that this human is not as tough as a Fisher bike. Schumpeter would have loved to know that people are still biking to work.

[cjppjc]

Re: Ghost of Joseph Schumpeter and the second end of the Monthly Payment Consumer - Eric Janszen

Why not just literally give/force the banks that have received taxpayer bailout money to give up homes to those that need them? There's no reason why Tent Cities should be popping up in various cities, while there sits literally millions of homes vacant with no one living in them. Some of the McMansions you could put 2-4 families in!

I think a potential business model is realizing that we had this huge boom in real estate (which can be classified as an infrastructure improvement, similar to rail/mass transit), where we can literally put millions of homeless people off the streets and/or house most of the population in the US. Now find a way to connect all those homes together in such as way that eliminates the spatial boundries that typically define a "city". From there you can begin to build a productive model for an economy that is more local, more productive, and is sustainable over the long term. Wishful thinking on my part...perhaps. But grand ideas are never borne out of pessimism simply because pessimism is, as a whole, negative and self-serving at the expense of takings risks that may one day pay off exponentially.

With all due respect, you aren't serious. This is a pretty silly idea.

[The Outback Oracle]

Re: Ghost of Joseph Schumpeter and the second end of the Monthly Payment Consumer - Eric Janszen

Aus is a bit interesting at the moment

My daughter is buying a house (against my advice but the nesting instinct has got too much for her) and she can borrow at 5.25%. Also gets a Govt subsidy of $14,000 ON THE PURCHASE - First Home Buyers Grant

You can still get 500 days (or 500 years or something) "interest free" on a Flat screen etc

I got a notice from a mining company for a meeting to ratify a restructuring of debt...Interest rate currently 12%. Talk about a country with its priorities wrong!!!

One change on the House Purchase...unless she has 25% deposit (or a gurantee from someone with some substantial assets) there is a $6500 Mortgage Insurance charge on a loan of $25000!

[ChessMan]

Re: Ghost of Joseph Schumpeter and the second end of the Monthly Payment Consumer - Eric Janszen

Nice article. To me looks like PCE is headed back down. What's a sustainable level for PCE? I think ~65% of GDP.

[nero3]

Re: Ghost of Joseph Schumpeter and the second end of the Monthly Payment Consumer - Eric Janszen

I'm afraid pretty bad inflation is here now. There is the irony that the consumer saves in the bank, typically in the times when it ravages their savings the most, and in the times it is smartest to have a big loan, like right now.

[snakela]

Re: Ghost of Joseph Schumpeter and the second end of the Monthly Payment Consumer - Eric Janszen

Since it started in the early 1980s, every time the FIRE Economy ran into trouble (1987 post stock market crash, 1989 post LBO bubble collapse, and 2000 post tech stock collapse) it was bailed out by central banks either directly or indirectly.

Full Disclaimer[/URL][/FONT]

But why will this time be any different? That is the question I am trying to get my mind wrapped around and the answer will likely determine the path I choose for my career.

[Slimprofits]

Re: Ghost of Joseph Schumpeter and the second end of the Monthly Payment Consumer - Eric Janszen

But why will this time be any different? That is the question I am trying to get my mind wrapped around and the answer will likely determine the path I choose for my career.

Consumer citizens are tapped out.

The economic crisis will again turn a generation of Americans into savers and critical consumers that look at total prices of goods, not monthly payments, and avoid debt. The era of mass marketing of consumer credit and riding the wave of debt-financed consumerism of the past 25 years is over. Only those companies that prepare for this sea change in consumer attitudes will survive

.

[metalman]

Re: Ghost of Joseph Schumpeter and the second end of the Monthly Payment Consumer - Eric Janszen

But why will this time be any different? That is the question I am trying to get my mind wrapped around and the answer will likely determine the path I choose for my career.

read the whole atrticle?

The credit bubble that started in the early days of the FIRE Economy in the early 1980s collapsed with the housing bubble starting in 2006. Debt deflation and global depression will put an end to the MPC over the coming years in a rhyme of events that Schumpeter explained 70 years ago.

Personal consumption expenditures decline for the first time in over 70 years


Household debt levels fall for the first time since The Great Depression

The collapse of the FIRE Economy is revealed in the March 2009 Fed Flow of Funds report Z.1 table d.2 for anyone to see.

Since it started in the early 1980s, every time the FIRE Economy ran into trouble (1987 post stock market crash, 1989 post LBO bubble collapse, and 2000 post tech stock collapse) it was bailed out by central banks either directly or indirectly. In 1991, debt levels declined in every category except financial, which virtually doubled, accounting for the growth shown. After the tech stock bubble collapse, foreign central bank borrowing restarted the FIRE Economy. But in 2008, all avenues failed. Non-financial, finaicial sector, and even local and state government debt growth declined, all except for Federal government debt. (See: Flow of Funds Q4 2008: Debt Deflation confirmation - Eric Janszen)

[Slimprofits]

Re: Ghost of Joseph Schumpeter and the second end of the Monthly Payment Consumer - Eric Janszen

The editors, advertisers and benefactors behind Newsweek magazine, owned by the Washington Post Company, are worried and understandably so. The jig is up.

As consumers hibernate and investors hoard cash, the economy is withering. This new age of thrift is understandable. But for a recovery to take hold, Americans will need to start taking risks again.




The rush to hoard cash and pinch pennies is understandable, given that some $13 trillion in net worth evaporated between mid-2007 and the end of 2008. But while it makes complete microeconomic sense for families and individual businesses, the spending freeze and collective shunning of nonguaranteed investments is macroeconomically troubling. Especially if it persists once the credit crisis passes.

For our $14 trillion economy to recover and thrive, hoarders must open their wallets and become consumers, and businesses must once again be willing to roll the dice. Nobody is advocating a return to the debt-fueled days of 4,000-square-foot second homes, $1,000 handbags and $6 specialty coffees. But in our economy, in which 70 percent of activity is derived from consumers, we do need our neighbors to spend.

http://www.newsweek.com/id/189232

[metalman]

Re: Ghost of Joseph Schumpeter and the second end of the Monthly Payment Consumer - Eric Janszen

The editors, advertisers and benefactors behind Newsweek magazine, owned by the Washington Post Company, are worried and understandably so. The jig is up.

As consumers hibernate and investors hoard cash, the economy is withering. This new age of thrift is understandable. But for a recovery to take hold, Americans will need to start taking risks again.




The rush to hoard cash and pinch pennies is understandable, given that some $13 trillion in net worth evaporated between mid-2007 and the end of 2008. But while it makes complete microeconomic sense for families and individual businesses, the spending freeze and collective shunning of nonguaranteed investments is macroeconomically troubling. Especially if it persists once the credit crisis passes.

For our $14 trillion economy to recover and thrive, hoarders must open their wallets and become consumers, and businesses must once again be willing to roll the dice. Nobody is advocating a return to the debt-fueled days of 4,000-square-foot second homes, $1,000 handbags and $6 specialty coffees. But in our economy, in which 70 percent of activity is derived from consumers, we do need our neighbors to spend.

http://www.newsweek.com/id/189232

make that a $11 trillion economy and 60% consumption and we're on the same page