“End of Boom Psychology” or “The Great Spending Contractions”

[Rajiv]

“End of Boom Psychology” or “The Great Spending Contractions”

I read a term today, that I was unable to find a meaning for: “End-of-the-Boom Psychology,” and I found the term so provocative, so “media speak,” so “spin doctor,” that I started thinking about the emotional and psychological impact on people who no longer have access to extracting mortgage equity, home equity loans or credit cards. They could have called it the “Depression Mentality” or the ‘Great Spending Contractions,’ because once a family has to start cutting back on their spending, like labor, the economic pressure squeezes will happen closer together and become more painful with each contraction, but without the baby after it’s all over. Less spending will mean major job loss, and more contractions. Inflation means less discretionary spending. No savings means relying more on credit and debt, but what happens when these sources dry up or are maxed out?

First, a few tidbits of information to provide a backdrop to our discussion:

1. There appears to be an inverse relationship between savings and access to credit/home refinancing.........
2. In trends all over the world, middle class citizens in emerging economies quickly take to the habit of ‘borrowing in order to spend,’ usually with credit cards.......
3. Wealthy and cash-strapped households use home equity differently.........
4. People tend to buy more consumer goods with credit cards and home refinancing, than if they were forced to withdraw from savings for the same purchase.
5. As about 2/3rds of American households do not save in a typical year, and average over $8,000 in credit card debt, they increasingly rely on credit cards for basic and emergency purposes.
6. Despite the potential risk of credit default, even relatively poor credit card users are extremely profitable to credit card companies........
7. Beyond basic necessities, increasing income and consumption does not translate into lifestyle happiness or contentment. ........
8. Many people are in denial about the level of credit card debt that they hold.....
9. Money is one of the top issues couples fight about......