Consumers Can Rescue the Economy by Joel S. Hirschhorn

by Joel S. Hirschhorn
featured writer
Dandelion Salad
www.foavc.org
January 7, 2009

When I was young talk about millions of dollars impressed me. When I was older talk about billions of dollars dismayed me. Now, regular talk about trillions of dollars, especially government spending, nauseates me. People never seem to learn that they control the fate of the American economy.

It is far too easy to blame in bad times or thank in good times Wall Street, the government, or super-rich and powerful financial entities. In actual fact it is always the spending of money by the general population on consumer products and services, housing, cars, or investments that drives the economy. The core problem is that the public does not act in concert to serve its own interests but, instead, takes its cues from the external world and puts its trust in the wrong people and entities.

In other words, besides all the blame that rightfully can be heaped on many others for the current recession, it is also true that the public through its dollars drove the nation and the world into the current meltdown, mostly by using far too much borrowing. They got suckered into using easy credit. True, in many cases, they acted on incorrect and intentionally misleading information and were taken advantage of. But so much of this consumer behavior was driven by greed or stupidity. Confidence was placed in government regulation, Congress, mortgage and other financial companies, banks, and more generally in the plutocracy that runs everything that matters. We had delusional prosperity because most of the population had willingly let themselves be deluded or manipulated by the power elites running the government and the economy. In essence, consumer power was usurped or pirated by the worst people in our society.

Here is the most critical fact. Consumers control over two thirds of the economic activity of the nation. Long before the current economic meltdown I kept writing about the potential political power of consumers. To get desired government actions, millions of consumers could threaten to cut their spending in order to get actions, like stopping the Iraq war or impeaching George W. Bush. But without leadership consumers just kept borrowing and spending, maintaining the delusional prosperity that they themselves propelled. Now they must act to fix things.

Now that the economic meltdown has hit us very, very hard it is critically important for people to understand that depending on the usual power groups to turn the economy around is dumb. Thinking that President Obama, Congress and various federal agencies, in particular, will save us is continuing the delusional thinking that has been like a chronic disease.

American consumers must understand that literally within days and weeks THEY themselves could turn around the economy. I was struck by data from the Federal Reserve that there is, even after the grotesque economic meltdown, presently a historic amount of cash is in bank and money market accounts, an astounding $8.85 trillion. Look at that number again. Relative to all the government bailouts and likely actions to stimulate the economy, that number is remarkable. That humongous amount of cash (not the value of homes and investments) comes to about $29,000 for every man, woman and child in the nation, or roughly $88,000 per household.

Your first thought may be “I don’t have that kind of cash!” In fact, economic inequality has risen terribly in recent years, helped by various public policies, making the affluent rich and the rich super-rich (and most of the middle class poorer). This means that much of this national cash belongs to a relatively small fraction of the population, perhaps 20 to 30 million people.

No matter how much cash we have, we must put our faith in ourselves more than the government or the business and investment sectors to turn the economy around. The more cash you have, of course, the greater your potential power to push economic recovery. We often hear about consumer confidence. Whether people are in the mood to spend or whether they have become too afraid for their personal financial security, causing them to spend as little as possible.

To turn the stock market and just about every segment of the private sector around, 10 to 20 million Americans must grab their inherent consumer power and start spending and investing with gusto, from home appliances, computers, cars, clothing, furniture, new homes, travel, and so on.

The stock market would immediately start to climb up, retail stores would stop closing, the automotive sector would resume producing cars, companies would start rehiring and the news media would start pumping out good news that, in turn, would trigger still more consumer confidence and spending. Suddenly, a positive spiral of economic activity replaces the hoarding of cash that has driven the negative economic spiral.

Think of that number $8.85 trillion again. Think of it relative to the billions and trillions constantly talked about to spur economic recovery through bailouts and other government actions, all of which must somehow channel money into consumers’ pockets or make credit for them more available. A modest fraction of all that cash, say a quarter, has the economic power to do more good than anything the government does. Better than all those government actions is the absolute certainty that rapid increases in consumer spending and investment would definitely drive the economy upwards. Positive consumer confidence can feed on itself psychologically, become a viral message that shoots the economy forward, reverses unemployment, makes stocks and mutual funds and, therefore, retirement accounts more valuable, and so on.

We sure could use some national leadership that motivates and inspires use of consumer power, rather than all the blabbering about what the government should or should not do. Americans have the choice to depend on politicians or to depend on themselves. Either use YOUR cash-power or remain victims of greed and corruption, as well as the inevitable incompetence of politicians and government officials. Consumer power awaits you. The nation needs it to avoid still more massive federal deficits and borrowing and inevitable tax increases. We the people must do much than vote; we must use our dollars to save our own financial health. Unless we shift our thinking and spend, we will stay in economic hell for a long time. We are the economic stimulus solution we’ve been waiting for.

[Contact Joel S. Hirschhorn through www.delusionaldemocracy.com.]

see

Richard C. Cook on Cindy Sheehan’s Soapbox Show

The End of Capitalism? Cracks in the Foundation

The Economy Sucks and or Collapse 2

One thought on “Consumers Can Rescue the Economy by Joel S. Hirschhorn

  1. While the January 4, 2008 Washington Post article (Bloomberg News) doesn’t say anything at all about “consumers”, it does say a lot about “investors” and “investment”. I’m not sure where Mr. Hirschhorn got his statistics regarding 20- to 30-million people, but at best this represents only 6- to 10-percent of the total U.S. population. While this seems a reasonable figure, it’s also probably safe to assume that nearly all of the $8.85 trillion is controlled by a much smaller percentage — probably 1-percent or less. Moreover, the people who control nearly all of this money are first and foremost “investors”, not merely “consumers”, and therein lies the root of the overall problem.

    If for any reason investors do not anticipate a healthy return on investment, then they either stop investing or they “diversify”. As the Bloomberg article suggests, investors tend to deliberately “hoard” their money under unfavorable conditions rather than investing in production, though outsourcing production overseas is another proven strategy for evading labor costs. It’s perfectly legal for investors to pursue either strategy, and it doesn’t require a “union” or any sort of coordination as labor strikes do. There is no law or even moral code that suggests investors must “spend” their money in order to “rescue the economy”. After all, it is their money, right? Who died and left “Joel S. Hirschhorn” in charge? $8.85 trillion in dormant capital is the “private property” of investors to either spend or not to spend as they see fit — period.

    It is important to note that billions of lives rely absolutely upon the “confidence” of this handful of investors in their potential return on investment (the market). But even so, the most common reason for investors to lose confidence in the market is that human wages are too high and therefore diminish their potential return on investment. Moreover, any political activity that tends to favor human labor is not in the best interest of investors, and could also potentially spark an “investment strike”.

    Termed a “saving glut” by Ben Bernanke and others since 2005 or earlier, the current investment strike forces increased U.S. unemployment, drives U.S. wages down and keeps U.S. politicians in check. Assuming U.S. wages are far too high for investor “sensibilities”, this strategy seems to be working remarkably well. As Bloomberg News states, “jobless claims reached a 26-year high last week”. I would further assume this investment strike forces a tight reign (straight-jacket) on the incoming Obama administration to ensure the new U.S. President doesn’t pursue any agenda that is not in the best interest of global capital. An extended investment strike also threatens to kill thousands (millions) of people. But investors aren’t interested in the death rate — only the rate of profit.

    So I’m understandably confused about what “consumer power” Mr. Hirschhorn might be referring to. Dead people don’t tend to do a lot of shopping, Mr. Hirschhorn, and without any purchasing power, living people don’t either. Without jobs, without incomes, with their savings depleted, and over their heads in debt, what sort of “power” do U.S. “consumers” have at their disposal to “rescue the economy”, Mr. Hirschhorn?

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