Tuesday, March 1, 2011
© 2011, the Institute for Applied Common Sense
Potential college grads do not need experts to tell them that they have some difficult choices to make this spring. We Baby Boomers have pretty much screwed up things for them. We managed to give the rich, particularly the nouveau riche, virtually all of our marbles and a bunch of our lunch money just to get safe passage to school.
Several days ago, we ran across an article where the author subscribed to the notion that either the solution to, or the root of a, problem can be found in the asking of the question.
Just minutes ago, we heard a radio commercial for a bathroom remodeling company, which may provide a practical example of the concept. (Shortly after, we heard an economist say that consumer spending in the U.S. needs a spark, since it constitutes 70% of the nation’s economy.)
When we heard, “Are you tired of your bathroom,” we laughed out loud. That consumers would seek out the services of any company (or anyone) simply because they are tired of how something feels, looks, smells, tastes, or sounds grabbed us. (Are there such companies to find new spouses?) Our parents born in the Depression were comfortable with conspicuous subsistence, while storing cash in the coffee can planted in the back yard.
It occurred to us that this change in attitude amongst the Boomers might explain much about the American consumer, or even the American psyche, at this point in our economic evolution.
Back in the late 1970s, several of our Fellows worked for a large firm. All employees received one month’s pay as a Christmas bonus. Right in the middle of the double-dipped recession of 1980 - 1982, the most ambitious partners left, carrying a bunch of business (and accompanying staff members), to form a new firm, which had different ideas about the future.
But times were tough, and come Christmas talk was about whether we would get paid, not whether we would receive a bonus. Instead of looking for the icing on the cake, we wondered whether we would get any beans.
Recently, we heard a comment by a caller during a C-Span program. China was the topic, and the point at which it would overtake America as the dominant economic force was the issue. (Last month, China supplanted Japan as the No. 2 global power.) “1.4 billion people seeking what we have is a powerful force.” He further suggested that it can’t be stopped.
Hunger is a powerful force. So is the resultant increase in the ranks and spending power of the Chinese middle class.
Yesterday, a taxi cab driver remarked that the area where the Institute is located was just woods 50 years ago, although there was an occasional shack with an outhouse. Those of you who have never used an outhouse might find it odd that someone might get tired of one.
According to the Wikipedia:
“In 1929, consumer spending was 75% of the nation's economy. This grew to 83% in 1932, when business spending dropped. Consumer spending dropped to about 50% during World War II due to large expenditures by the government and lack of consumer products. It has risen since 1983 to about 70%, as the result of relaxed consumer credit. Spending dropped in 2008 as the result of consumer fears about the economy. Consumers saved instead of spending.”
So all we middle-class consumers need to do is start spending.
But what’s the source of income for ordinary consumers? Many are having difficulty finding jobs, and just putting food on the table.
Then it hit us. All of a sudden we understood why some contend that tax cuts to the rich will aid the economy. Someone recently sent us an economic chart reflecting how the economic status of the middle class has not improved over the last 25 years.
It also reflected a 33% increase for wealthy Americans.
Common Sense suggests, at this point in our economic evolution, that it’s the rich folks who aren’t spending, or investing, or hiring, or much of anything else to benefit those of us at the bottom of the heap. And that’s who we Baby Boomers are going to have to wait on.
But upcoming college graduates can learn from our mistakes, and not be so foolish about their personal economies.
Just the other day, we ran across a company, Get It Together, which describes itself as a leader in independent financial and legal education. They provide workshops and mentor programs on financial and legal planning, coupled with credit management. What group is their primary target audience?
Better late than never.
Now, are you tired of your bathroom?
P.S. The Logistician always contended, while working 3,000 hour years, that he could have realized more dollars on an hourly basis being a plumber.
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