Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
Why Most Investors LOST Money by Investing in ARK FUNDS - 27th Jan 22
The “play-to-earn” trend taking the crypto world by storm - 27th Jan 22
Quantum AI Stocks Investing Priority - 26th Jan 22
Is Everyone Going To Be Right About This Stocks Bear Market?- 26th Jan 22
Stock Market Glass Half Empty or Half Full? - 26th Jan 22
Stock Market Quoted As Saying 'The Reports Of My Demise Are Greatly Exaggerated' - 26th Jan 22
The Synthetic Dividend Option To Generate Profits - 26th Jan 22
The Beginner's Guide to Credit Repair - 26th Jan 22
AI Tech Stocks State Going into the CRASH and Capitalising on the Metaverse - 25th Jan 22
Stock Market Relief Rally, Maybe? - 25th Jan 22
Why Gold’s Latest Rally Is Nothing to Get Excited About - 25th Jan 22
Gold Slides and Rebounds in 2022 - 25th Jan 22
Gold; a stellar picture - 25th Jan 22
CATHY WOOD ARK GARBAGE ARK Funds Heading for 90% STOCK CRASH! - 22nd Jan 22
Gold Is the Belle of the Ball. Will Its Dance Turn Bearish? - 22nd Jan 22
Best Neighborhoods to Buy Real Estate in San Diego - 22nd Jan 22
Stock Market January PANIC AI Tech Stocks Buying Opp - Trend Forecast 2022 - 21st Jan 21
How to Get Rich in the MetaVerse - 20th Jan 21
Should you Buy Payment Disruptor Stocks in 2022? - 20th Jan 21
2022 the Year of Smart devices, Electric Vehicles, and AI Startups - 20th Jan 21
Oil Markets More Animated by Geopolitics, Supply, and Demand - 20th Jan 21
Fake It Till You Make It: Will Silver’s Motto Work on Gold? - 19th Jan 22
Crude Oil Smashing Stocks - 19th Jan 22
US Stagflation: The Global Risk of 2022 - 19th Jan 22
Stock Market Trend Forecast Early 2022 - Tech Growth Value Stocks Rotation - 18th Jan 22
Stock Market Sentiment Speaks: Are We Setting Up For A 'Mini-Crash'? - 18th Jan 22
Mobile Sports Betting is on a rise: Here’s why - 18th Jan 22
Exponential AI Stocks Mega-trend - 17th Jan 22
THE NEXT BITCOIN - 17th Jan 22
Gold Price Predictions for 2022 - 17th Jan 22
How Do Debt Relief Services Work To Reduce The Amount You Owe? - 17th Jan 22
RIVIAN IPO Illustrates We are in the Mother of all Stock Market Bubbles - 16th Jan 22
All Market Eyes on Copper - 16th Jan 22
The US Dollar Had a Slip-Up, but Gold Turned a Blind Eye to It - 16th Jan 22
A Stock Market Top for the Ages - 16th Jan 22
FREETRADE - Stock Investing Platform, the Good, Bad and Ugly Review, Free Shares, Cancelled Orders - 15th Jan 22
WD 14tb My Book External Drive Unboxing, Testing and Benchmark Performance Amazon Buy Review - 15th Jan 22
Toyland Ferris Wheel Birthday Fun at Gulliver's Rother Valley UK Theme Park 2022 - 15th Jan 22
What You Should Know About a TailoredPay High Risk Merchant Account - 15th Jan 22

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

What if the World Stops Spending for Good

Economics / Recession 2008 - 2010 Feb 15, 2009 - 05:06 PM GMT

By: Kevin_Geary


All the politicians and policy makers around the world are trying to do what actually may be impossible.

They are trying to get banks to lend again and they are trying to get "Joe Public" (consumers) to spend again. Nothing they are doing is working so far, and nothing they are likely to do will get banks to ease credit again, nor people around the world to spend again like there's no tomorrow, or in other words, like they did before yesterday.

We are in a worldwide deflation both of demand and consumption, as well as prices. The reasons are not just psychological (like those who have stopped spending out of fear of losing their jobs, or their savings, or their stockholdings), but deeply fundamental.

For many years, countries like the US, England, Ireland, etc., have seen boom times, but most of it was based on huge amounts of personal debt. People were borrowing from the "equity" or "appreciation" of their assets (their homes) and spending with credit, in the mistaken belief that, even though they were building up huge mountains of personal debt, the economy would carry on expanding, and their "worth" would keep on going up. This was despite the fact that, in many of the "industrialized" countries, manufacturing was disappearing, or being "outsourced," meaning that people were no longer making things to export, and increasing real wealth, but instead were importing things from overseas, and consuming them on borrowed money.

Until recently, if you failed in business, or lost your home, or had to go bankrupt, you were looked upon as an oddity, a screw-up, or some kind of pariah, even by those whose conspicuous consumption was leading them unwittingly into the same future abyss. Now, everyone is virtually in the same boat, or fear they soon will be, and talking about your distress is as acceptable as talking about how well-off you used to be only a year ago.

The party is over. Everyone knows this instinctively, even if they can't read a balance sheet. In America and Britain and Ireland peoples' banks have cut off their lines of credit, or upped their interest rates, or lowered their credit limit AND upped their interest, and collectively everyone is waking up to a huge hangover. Like all good hangovers it has caused people to say "I'm not going to do that again!" We have been forced into a kind of collective "spending binge detox," unwillingly, yes, but nevertheless a cold-turkey detox. But governments, particularly our own here in the US, have failed to recognize that their idea of "freeing up credit" and getting us all to cure our hangover with "the hair of the dog" is doomed to failure (except maybe for those who are irredeemable "spendaholics.")

What if the world stops spending for good? What if everyone in the US, China, India, Europe, all stop spending, start saving every spare penny, and only spend on dire necessities like food, shelter and utilities? Already all the car manufacturers worldwide have seen a drastic fall in sales, and it isn't just because people can't obtain credit to "buy" the new cars, it's because people have collectively changed their whole mindset, and going out to spend (even when they can easily do so), to get something "new" before the old thing has failed, is just no longer considered desirable, feasible or prudent. The whole premise that we have built our economies upon (the constant desire for consumption of the newest and latest) has fallen apart, and all the current attempts to fix it, using the idea of stimulus, relaxation of credit, etc., appear doomed to fail, because it's based on a no longer existent premise.

How we will emerge from this fix seems impossible to predict. But the "remedies" being tried are doomed to fail at present, as long as people no longer want to spend like drunken sailors on a weekend pass in a foreign port. Until we address the question, "What if the world stops spending for good?" it seems we are headed deeper into a worldwide depression, as politicians try to spend us out of our situation, based on the mistaken belief that easing credit, and "creating jobs" will get us back into spending again, like we used to do. That ship has sailed, and it's time for us all to recognize it, and figure out how to replace it with something new.

By Kevin Geary

Kevin Geary is an artist who lives in Sedona, Arizona. He was the youngest political cartoonist on the Financial Times at the age of 19. He had his first one man show at 20, opened by the prime minister of Great Britain, Harold Wilson. He has had over 60 exhibitions of his work; has work in several major museums, including the National Portrait Gallery in London, and his work has sold at major auction houses, such as Christie's, in London, Whyte's in Dublin and Doyle in New York.

He has followed politics, history and economic history for many years, and has also written about it elsewhere online. He predicted this depression long before it happened, timed the collapse of the stock market in June last year, long before it happened, and his stock picks have often been very accurate. The four stocks he picked on January 1st, 2009 to do well (Amazon, Apple, Baidu and Google ), are all up from the beginning of the year. He does not offer specific public advice about stocks, but he has written from time to time about long and short term trends in the political and economic realm.

© 2009 Copyright Kevin Geary - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in