Consumer spending trend is a shaky foundation for economic recovery

[laughingliberal]

By Don Lee, Los Angeles Times
May 16, 2010 | 9:33 p.m.
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Reporting from Washington
Increased consumer spending has fueled hopes that the current economic recovery will keep getting stronger, but behind the encouraging numbers is a little-noticed reality: Much of the new spending has come not from America's broad middle class but from a small slice of affluent people at the top.

And upper-crust spending, while welcome, can be worrisomely volatile: Since it involves luxuries, not everyday necessities, the buying can suddenly shrink if something such as the recent stock market plunge panics affluent shoppers.

What's more, some analysts calculate that another big chunk of the recent spending spurt has come from an even shakier source — delinquent homeowners who have more cash in their pockets because they've stopped making mortgage payments now that their houses are worth less than the loan amounts. <snip>

http://www.latimes.com/business/la-fi-consumer-spending-20100516,0,4184055.story

[Newest Reality]

1. It appears that a huge swath of people in this culture

are being written off. The wealthy have the ways and means and financial mechanisms to insulate themselves and even thrive.

All total, when you look at the general nature of the financial calamity, there will be no recovery. Even though you hear snippets and sound bytes about expectations for one, what you are witnessing is a systemic collapse and an impending crash. Life will change permanently for growing number of people.

There is a problem with the predominant financial rhetoric generated by a system that struggles to keep itself intact and profitable despite the critical confluence of factors that are building up. That leaves the rest of the population in a predicament. They can either play along and sing happily about the dilemma using hope and faith as a prophylactic for the realities, or they can accept the impending break down and prepare in what ever ways it is possible to do so.

Avoid the gloom and doom and fiddle away, or own up to the nature of the game at this stage and go through whatever emotional and mental stages you have to go through to digest and accept the transitions ahead. Both choices have their pros and cons. How people react and respond to uplifting news or what some call "gloom and doom", (usually in a condescending, pejorative manner) tends to reveal that choice.

[LongTomH]

2. The word for today is 'Plutonomy'

Try Googling on that word. Combine pluto for wealth and economy and you’ve got Plutonomy: an economy driven by the spending patterns of the very rich (upper 1 % of the population), extremely rich (upper 0.1%) and the “mega-rich” (upper 0.01%).

I first read the word in Naomi Klein's book: The Shock Doctrine: The Rise of Disaster Capitalism. The word actually came from a 2005 paper by Ajay Kapur, an analyst for Citigroup. His thesis is that, economies in ‘advanced economies’ like the U.S., U.K. and Canada are being driven by consumption by the rich and mega rich. Actually, many of the developing countries are becoming plutonomies; India, for a while, had the highest number of billionaires in Asia; at the same time it slipped to number 150 on the United Nations Habitability Index.

In a plutonomy there is no such thing as an 'average consumer.' There's the very rich and the rest of us. One example of plutonomy spending, would be the Rolls-Royce Drophead Coupe. Rolls-Royce is making a major pitch at the plutonomy market. According to a BBC article, Rolls-Royce owners:

• Also own 3 to 5 properties, including:
  
• One or two outside their own countries.
  
• They own 7 or 8 cars
  
• 14% of them own a private jet
  
• 7% of them own a yacht

Some investment funds are offering a plutonomy basket of stocks aimed at corporations which serve the consumption 'needs' of the ultra-rich.

How'd we get into this mess? Google up some Kevin Phillips articles on the way the U.S. economy has moved from making things to financialization, playing games with money. The increase in wealth for the very rich in recent years has come from "speculation on equity markets, real estate and commodity trading, rather than from technical innovations, investments in job-creating industries or social services.” In other words, they're not really contributing very much to the real wealth of the United States. So much for 'the deserving rich.'

[marmar]

3. The selective economic recovery......

....It's a sham, and the poor, working- and middle-classes know it.

[hayu_lol]

4. Until there are jobs for those who used to work...

there is no recovery possible. With factories continuing to go offshore without restrictions, the remaining jobs get scarcer and scarcer.

Awful lot of us want to work, need to work, have the skills to work...but there are fewer jobs than ever.

For older Americans and younger Americans as well, there are no part time jobs left that were part of our income.

Fewer jobs mean NO Recovery.

[laughingliberal]

5. This fits perfectly with the observations we've seen in our business.

The only customers we're hearing from wanting work done are the exceedingly wealthy. I thought it might just be the nature of our business but this suggests it's broader than that.