ACTUAL TIMES ONLINE HEADLINE: “PUNISH SAVERS AND MAKE THEM SPEND MONEY”
January 10th, 2009I’ve collected a few quotes to go along with this.
Rather than attempting to bring down The Machine suddenly, in a manner that would, almost certainly, result in the use of strategic nuclear weapons, we should gradually destroy The Machine (and let it destroy itself), while learning the skills necessary to make living in a post collapse reality not only possible, but enjoyable.
How do you gradually destroy The Machine?
Living on as little money as possible, bartering for or buying only what you can’t produce yourself, in my opinion, does a great deal of harm to this system.
—Resistance on the Brink of Oblivion
In America (and wealthier parts of the “West” in general), people don’t have to blow up a natural gas pipeline and shut down a factory or cut enough fiber to crash the NYSE and the NASDAQ market systems for a few minutes, hours or days. Voluntary simplicity, or, living well on very little money, kicks evil people in the nuts and gouges out their eyes. (Pacifists may think of this as sending the enemy Joy and Happiness if they desire.) Doing this in the U.S. has a force multiplier effect because the U.S. is the largest source of the funds that keep the global ponzi scheme running. When people in wealthy countries opt out, the action causes major economic damage to the machine.
…
It’s a matter of hacking The Matrix in an efficient and innovative manner to reduce your monthly expenses to a fraction of previous levels. The extraction/domination system in the U.S. has few effective defenses against people who opt out—to the extent possible—by making smart use of available resources. The system assumes that you’ll stay hooked forever on a lifestyle built around profligate waste and going deep into debt to buy crap that you don’t really want, or need. Indeed, most people are content to go through life this way.
—Mexico Gas Line Explosions Force Major Factories to Close Down
It’s the folks in good shape that the economy has got to watch out for. If consumers who are in good shape decide to cut back on spending in order to reduce their credit card balances, that would take a considerable amount of spending out of the economy. There is some evidence that this has started to happen.
—“We’re Inching Dangerously Close to the Point Where Consumers Run for the Hills”
If a regular insurgency movement reduced the banks and their data centers to piles of smoking rubble and assassinated the executives and members of the boards of directors, that situation would represent a walk in the park compared to what “consumers” are about to do by abandoning their McMansions and stucco boxes.
—Troubled Homeowners: Can’t Pay? Just Walk Away
The American Corporate State is quite literally bankrupt, yet it continues to function do to an increasing flow of foreign capital that serves to finance its unimaginable levels of debt. If an insurgency was able to slow the flow of capital to corporations, by any means, the revenue loss could eventually cause reverberations throughout the economy that would be catastrophic for the American Corporate State and the wider system of institutionalized theft commonly referred to as “global capitalism.”
—Militant Electronic Piracy: Non-Violent Insurgency Tactics Against the American Corporate State
Via: Times:
Assuming interest rates are reduced to about 1 per cent today, it will make little difference to savers if they fall all the way to zero. To all intents and purposes, income from bank accounts will be reduced to nil.
The next logical step, although it may be politically controversial, would be to do the opposite of what the Tories suggest. Instead of reducing taxes on interest payments, the Government could tax all bank deposits and other risk-free savings. This would create a negative risk-free interest rate, encouraging savers either to invest in property, shares and other productive assets – or simply to save less and consume more. In either case, the result would be more consumption and physical investment, less unemployment and faster recovery from the slump.
More: Hard-Hit Families Finally Start Saving, Aggravating Nation’s Economic Woes
Rick and Noreen Capp recently reduced their credit-card debt, opened a savings account and stopped taking their two children to restaurants. Jessica and Alan Muir have started buying children’s clothes at steep markdowns, splitting bulk-food purchases with other families and gathering their firewood instead of buying it for $200 a cord.
As layoffs and store closures grip Boise, these two local families hope their newfound frugality will see them through the economic downturn. But this same thriftiness, embraced by families across the U.S., is also a major reason the downturn may not soon end. Americans, fresh off a decadeslong buying spree, are finally saving more and spending less — just as the economy needs their dollars the most.
Usually, frugality is good for individuals and for the economy. Savings serve as a reservoir of capital that can be used to finance investment, which helps raise a nation’s standard of living. But in a recession, increased saving — or its flip side, decreased spending — can exacerbate the economy’s woes. It’s what economists call the “paradox of thrift.”
U.S. household debt, which has been growing steadily since the Federal Reserve began tracking it in 1952, declined for the first time in the third quarter of 2008. In the same quarter, U.S. consumer spending growth declined for the first time in 17 years.
That has resulted in a rise in the personal saving rate, which the government calculates as the difference between earnings and expenditures. In recent years, as Americans spent more than they earned, the personal saving rate dipped below zero. Economists now expect the rate to rebound to 3% to 5%, or even higher, in 2009, among the sharpest reversals since World War II. Goldman Sachs last week predicted the 2009 saving rate could be as high as 6% to 10%.
As savings increase, economists say, spending is likely to contract further. They expect gross domestic product to decline at an annualized rate of at least 5% in the fourth quarter, the biggest drop in a quarter-century.
“The idea that the American family will quickly spend us out of this recession is a fantasy. It won’t happen,” said Elizabeth Warren, a professor of law at Harvard University who last month was named chair of the Congressional oversight panel tasked with overseeing the distribution of the government’s Troubled Asset Relief Program funds.
In Boise, families like the Capps and Muirs illustrate the paradox. This metropolitan area at the foot of the Rocky Mountains is home to a half-million people and is a base for electronics manufacturers such as computer-chip maker Micron Technology Inc. The area weathered downturns in the early 1990s and 2001, with unemployment rates remaining well below the national average. But now people here are socking away money they once would have spent, contributing in part to failing stores, shuttered restaurants and rising unemployment.
In 2003, the Capps moved to Boise from Swisswater, Pa., after Mr. Capp received an offer to work for Electroglas Inc., a company that makes equipment used in producing semiconductors. Pay for his field-service engineer job started at $65,000, and Boise’s cost of living was lower than Pennsylvania’s. Rick and Noreen and their two children — Noah, now 13 years old, and Ellen, now 16 — were excited to ski in the Rockies instead of the Poconos.
Move to Boise
The Capps sold their Pennsylvania home for $164,000 and bought a slightly larger, 2,200-square-foot home on a cul-de-sac in the Boise suburb of Meridian. They financed the $175,000 home with a 30-year mortgage, at a fixed rate of 5.8%.
Their children settled in well: Ellen sings in the school choir at Meridian High School, while Noah went to a local charter school and signed up for the chess club. In 2006, Mrs. Capp, now 45, finished her bachelor’s degree in psychology from Boise State University, and began working part-time for a mental-health clinic, earning about $10,000 a year. Mr. Capp, 44, also took classes at BSU.
Four years ago, the Capps took out a $25,000 line of credit on their home and used it to buy a large sectional couch for their family room and a used Toyota 4Runner, to go along with the family’s 1995 Toyota Corolla. Over the years, they also built up about $11,000 in credit-card debt and $40,000 in student loans.
But given the rising value of their home and of Mr. Capp’s stock options, their debt didn’t seem alarmingly high, they said. As the resale value of their home reached nearly $300,000 in 2006, the family took trips to Disneyland, paid $900 for ski passes and signed Ellen up for fiddle lessons.
That all changed quickly. The housing market in Boise started to turn downward at the end of 2006, followed by the stock market and the economy. Around the end of 2007, Mr. Capp’s employer began laying off some of its field technicians as customers put off servicing their equipment. “It’s just been one thing after another,” says Mrs. Capp.
The Capps started cutting back. In late spring, they began to trim their spending and paid down about half of their $11,000 credit-card debt. This summer, they used more than half of their government stimulus check, about $1,000, to open a savings account with an attractive interest rate of 5%.
“We never go downtown anymore,” says Mrs. Capp. “We’re trying to consume less gas, less electricity, less food. It’s across the board.”
Even the family’s cable-TV subscription didn’t escape the scalpel. “It’s been killing me because I don’t get the Cartoon Network anymore,” says Noah, a shaggy-haired teen. “I’m missing so many new shows.”
Community Impact
The impact of such decisions is visible around Boise. At Home Federal Bancorp, a $725 million bank with 15 area branches, the number of new savings accounts was up by 26% in December from the previous year, said Steve Eyre, the bank’s head of consumer banking. He said the bank is also seeing people save in their checking or money-market accounts. “It’s pretty interesting to see those balances actually increase at a time when there’s higher unemployment,” he said.
Meanwhile, many downtown restaurants have closed this year, including a number of locally owned eateries. Satchell’s — a family restaurant that was the Capps’ favorite — is gone, as are Zutto Japanese Restaurant, the 8th Street Wine Company, Mortimer’s Idaho Cuisine, Gino’s Grill, the MilkyWay and a French place called Andrae’s. Retail store closings have become so pervasive that the sign outside one surviving store, Dick’s Stereo, now proclaims “WE ARE STILL HERE.”
National retailers are pulling out as well. The Boise Towne Square, the region’s primary shopping mall, is losing one of its anchor tenants, a Mervyn’s department store. A furniture store across the street has also gone out of business. A nearby plaza has lost its two main tenants — Linens ‘n’ Things and Circuit City — as both liquidate nationwide.
Unemployment in the Boise area is still below the national average of 6.7%. But the rate has risen swiftly, to 6% in November 2008 from just 2.7% a year earlier. Unemployment is expected to climb to at least 8% by 2010, according to Moody’s Economy.com, about the same rate forecast for the nation as a whole.
By October, Mr. Capp, too, was out of work. His employer, Electroglas, trimmed its North American work force of field technicians from more than a dozen when Mr. Capp started to just four after he and several colleagues lost their positions, he said. Electroglas, based in San Jose, Calif., declined to comment.
With a severance package of about $10,000, the Capps say they paid off their remaining $6,000 in credit-card debt and have been living off the dwindling remainder.
Keeping the Old Car
Frugality has become a family responsibility. Mrs. Capp, a friendly and effervescent woman, nixed replacing her Toyota Corolla, even though it has 253,000 miles on it, a cracked windshield and Hawaiian-print covers over its splitting seats. The Capps have given up on skiing this year. Disposable paper towels have been replaced by washable rags.
Ellen’s college options are also limited. The family hadn’t started saving for college before the downturn and can’t put away enough money now. “We’re really pushing her toward scholarships or anything that can help pay for it,” says Mrs. Capp. They’ve considered having their tall, lanky daughter try modeling, but portfolio shots cost a couple hundred dollars.
Jessica Muir, too, would like to be socking money away for her children’s college educations. But the 31-year-old mother of three says she also can’t afford it now.
Jessica and Alan were high-school sweethearts in Caldwell, a small community near Boise. They married young. Mrs. Muir worked as a dental assistant before the couple’s first child, Gavin, was born five years ago. In 2006, Mrs. Muir gave birth to twins.
The same year, they bought a modest two-story home in Nampa, part of the Boise metropolitan area, with enough room in back for a vegetable garden. Unable to afford a 20% down payment, they took out two mortgages to buy the $144,000 home. Mrs. Muir cashed in her 401(k), using the roughly $3,000 to pay for insulation and a fence. The Muirs figured they’d get their money back when they sold the house for a higher price a few years later.
IRA Hit Hard
It hasn’t worked out that way, with real-estate prices falling along with the rest of their investments. Alan Muir’s government job as an Agriculture Department grape researcher is more secure than most, but his combined 401(k) and individual retirement account is down by about half, to $13,000.
To pare back, Mrs. Muir started “the Moneysavers Club,” an email group of about 30 people. The members alert each other about deals such as $8 winter coats at Old Navy, and they split bulk purchases of sugar and other staples. Mrs. Muir stores food in her garage, including vegetables she’s grown and canned herself. When she saw a great deal on eggs recently she bought 10 dozen, which she cracked into ice-cube trays, froze and transferred to bags for cold storage. “Not many people know eggs freeze,” she said.
She also sells hand-crocheted hats and scarves on Craigslist and at local bazaars, bringing in $85 on a recent weekend. Her husband, meanwhile, charges $20 an hour for guitar lessons on Wednesday nights, and takes trips into the Rockies with friends to cut firewood for the family’s wood-burning stove. The couple also recently split the $600 cost of a yearling calf with Mrs. Muir’s parents, who are raising it on their land in Caldwell. They plan to butcher it and eat the meat.
The cutbacks by the Muirs and others their age mark a particularly profound shift. In the American buying spree of recent years, the most profligate spenders were those under 35. As recently as 2006, for every $100 these Americans earned, they spent about $117. Those aged 35 to 55 had negative saving rates nearly as large. Only the large number of Americans 55 and older, who have always had high double-digit saving rates, kept the overall saving rate above zero, according to data from Moody’s Economy.com and the Federal Reserve.
Several factors are now pushing saving rates upward, including tighter restrictions on credit and home borrowing. Growth in consumer credit slowed to 1.2% at an annual rate in the third quarter, the Fed said, far lower than the 3.9% pace in the prior quarter.
The Muirs and Capps, like many Americans, also reined in holiday spending this year. Mrs. Muir started her shopping in July to snatch up bargains.
Mr. Capp didn’t want to spend any money at all on family gifts this year. His wife persuaded him that they could spare a few hundred dollars.
The Capps ended up spending about $370 in all, down from about $350 a person in previous years. Rather than spending Christmas day opening one gift an hour — a Capp tradition — they invited neighbors over to play the Nintendo Wii video game that was a Christmas gift for the whole family.
This year, Mrs. Capp and her husband are resolved not to touch the $2,600 they have in savings, and to augment as soon as possible. “You look around, you see the closing stores, and you know someone needs to spend,” Mr. Capp said. “Just not us.”
The only dim ray of hope in that abysmal Times editorial is that the vast majority of commenters call him on his bullshit.
@bloodnok: I think a lot (perhaps the majority, perhaps not) of the People understand that he’s full of it, but unfortunately, the mainstream media does not hire, let alone promote, people who embrace common sense, decency, fairness, etc. (I realize I’m probably not telling you anything you don’t know, but thought it was worth pointing out.)
What I “love” about this is that the author probably isn’t on the take from the corporate plutocracy, not consciously, at least. But he has the disease, which sees huge governmental solutions as the only solution. And this disease is making him write ludicrous things, and he doesn’t even realize it. Being completely dependent on the Machine, the small amount of freedom most of us have is a function of the small amount of money we’ve socked away. And now he’d have us sacrifice that to the gods of the MIC, and leave us with nothing but 100% dependency. Amazing.
Well, I guess this means that the Powerz are going to try and institute mondo-inflation with reckless monetary policy. After all, that is the most effective way to “punish savers and make them spend money”.
@anothernut: Yep. Further compounding the post-modern Dickensian nature of the situation is the fact that much of this “saving” very likely consists of paying down crushing debt-loads incurred while spending as though there would be no tomorrow. Well, tomorrow is today now!
Just this article on the author of this op-ed, Anatole Kaletsky. He has a history of writing upbeat articles, like saying the credit crunch was “almost over.” Apparently he heads a fund that is down over 16%:
http://www.thefirstpost.co.uk/45602,features,anatole-kaletsky-fails-to-declare-his-interest-richard-brooks
Maybe not in the U.K. but in the U.S., interest earned on Savings is already taxed when filing the income tax return. I think it was during Ronald Reagan’s admin that the interest that you used to pay on credit card balances stopped being an itemized deduduction. Then Bush II changed the IRS code where you could get a big break on funds earned through the stock market. Its a totally dumb back assward system.
Another thing occurs to me about this idea of forcing people to spend money: The corporate machine wants people to spend money, but it doesn’t want to pay the people who work for the machine more money. They want to have it both ways. The only way that works is for working people to take on the crushing debt-loads I mentioned in an earlier comment. But that can only go so far, and it has gone as far as it really can and then some. So what this daffy author seems to be proposing is throwing people who won’t go even more deeply into debt into “saver’s prisons” which would be the latter-day answer to the debtor’s prisons of old. That is so crazy as to be beyond Dickensian!
After all, it’s highly unlikely that this fellow is imagining a payraise for poorer working people mandated by force of law, with which I would have a lot less of a problem. I’m sure that would have difficult economic consequences of some kind, but it would still make vastly more sense than trying to force people to spend money they can’t really afford to spend or may not even have!
Can we learn to live without money? Can we learn to live without their money. Can we learn to monetize our own production? Can we use what we make or the service we provide money? Can we learn to serve one another without being told “what it is worth”? Their product is an illusion, a farce. Why would any thinking person trade their wealth {what they produce} for pieces of paper that are evidence of someone else’s debt? Get something real for your stuff, or just give it away to a trusted producer of something you yourself will need. Give more than you take, you cannot out-give a christ-like person. By their fruits {their production} you will know them.
@messianicdruid
If you learn how to pay property taxes without money, let me know. I also need to learn how to pay for electricity and Internet access without money. And a few other things.
@Kevin
When the time is right, we will have our answers. My comment about “a christ-like person” ie: a giver, fits you better than it fits me.
Just thought of another reason this is a load of bollocks:
The funds of savers represents real capital that can be used for investment and thus should not be squandered on unviable or inefficient businesses. In the current climate it’s very hard to tell what’s a good investment and what will be throwing good money after bad. The short answer is that there is a lot of crap in our economy that has to go. Yes, this will mean pain. It’s not the end of the world. Those that survive will be those that havent gone mad and loaded up on debt and flash company cars.
When the smoke clears – that’ll be the time for savers to start looking at investing in real productive capacity… that is if they havent been taxed to support the weak and wasteful.