Demand based on debt, unfulfilled promises and unaffordable habits is burning down.
The first-order effect of the lockdown was demand destruction as shelter-in-place orders and business closures restricted consumers’ ability to spend.
The second-order effect will be the permanent destruction of demand because people will realize they’re better off reducing their consumption of high-cost, questionable-value goods and services. Let’s start with the resurgence of savings, the most basic form of security you actually control and the most basic form of hedging against promises of a return to wonderfulness failing to arrive in the real world.
Comically, security you actually control, i.e. savings, are viewed by the status quo as a mortal threat to the economy: how dare you keep some of your own money rather than squander all of it! Notice how this bit of twisted CNN humor labels savings “hoarding,” as if retaining a bit of your hard-earned wages is evil “hoarding” rather than prudent self-sufficiency.
For those who weren’t alive to experience the 1980s, it was a boom era of widespread prosperity. In a functional economy, savings are understood as one of the foundations of prosperity. In today’s insanely dysfunctional neofeudal economy, savings are a despicable evil because they take the bread right out of the bankers’ and corporate elites’ mouths. How dare you rob poor Jamie Dimon and Jeff Bezos with your awful, horrible, cruel savings of money that you actually control, money that protects you and gives you some security!
In other words: how dare you serve your own needs and interests rather than our monomaniacal obsession with increasing our profits at your expense.
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