It is happening finally. According to an article in the San Francisco Chronicle, ‘Dollar’s Fall Forces New Standard of Frugality‘ amidst Americans. I could not be more pleased. ‘Squeezed by food and energy prices, tight credit, stagnant incomes and falling home and stock values, many consumers are throttling back.’
‘Ins and Outs of New Economic Order’
Source: Chronicle research, BudgetSavvyMag.com
What puzzles me however, are the responses from the economists:
‘We are going back to the good old days of living within our means . . . This is not the end of the world. It’s not Armageddon. It doesn’t mean we’re going to have to live in a cave or a hut or an RV. The areas of retrenchment are in areas we can do without, such as cutting out that extra vacation.’ David Rosenberg chief North American economist for Merrill Lynch
‘We are seeing the first pangs of a new economic structure. The next year or three will be about the transition to a new equilibrium. Consumption by households will grow more slowly than their incomes, which is the exact opposite of the last 25 years when consumption grew faster than incomes.’ Neal Soss, chief economist for Credit Suisse First Boston
‘Standards of consumption have to fall. The burden really falls on households.’ Ronald McKinnon, economist at Stanford University
‘The world has become multipolar. Our dominance will decline.’ Barry Eichengren, international economics expert at UC Berkeley
‘We should not look at today’s rising of credit standards as being bad. We’re returning to a more realistic credit paradigm after a period of excess. What people are comparing it to is something that was outlandishly unrealistic.’ Catherine Mann, professor of international economics and finance at Brandeis Business School
‘I see no reason that we can’t continue to enjoy productivity gains and double the standard of living in the next 30 or 40 years. I still sense that there’s lots of excitement for things like solving our clean echnology problem. I don’t see a country that’s down on its luck and out of ideas.’ Joen Shoven, director of the Stanford Institute for Economic Policy Research
You would think these new behaviors from the American people would be the perfect occasion for a paradigm shift in the economics narrative, but no . . .
Being an optimist, I am choosing to retain the good news. People do respond to limits. And in its own twisted way, the market system does work, including for climate protection.