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Returning to the slightly-worse-than-yesterday but still good ol' days
- By Dan Davis
- December 18, 2009
Mohamed El-Erian, who is CEO of an investment firm called Pimco, but who also was once in charge of steering Harvard University's $30 billion endowment for a short while, told his interviewer that U.S. consumers face considerable pressures related to high unemployment, underemployment, and rebuilding their nest eggs. He doesn't even mention the skyrocketing cost of health care and college tuition. The U.S. consumer of the late 1990s and early 2000s won't be showing up at the door of retailers anytime soon.
"& the ATM has disappeared—for a number of years we all used our houses as ATMs. So it's very difficult for the U.S. consumer to continue carrying not only the U.S. economy but also the rest of the world," he told the magazine.
That doesn't necessarily sound like a good thing, but perhaps this is the beginning of a transformation that is good for the overall health of the U.S. Right now estimates suggest that consumer demand drives as much as 85 percent of the total GDP, most of that from domestic households. Imagine if U.S. companies are forced to focus their attention more on other countries. All of a sudden the burden of stimulating the whole world's economy doesn't fall on the U.S.
El-Erian agreed with that thought. U.S. consumers saving more is not necessarily a bad thing.
"It's absolutely a good thing," he said. "The rest of the world starts being all these other engines, and we move from a world of excessive dependence on the U.S. consumer to a multipolar world. That's also a good thing. This trouble is this transition."
So it's not going to be easy, but I think we're all finding that out now. Real change doesn't come without pain.
I'm especially interested in this transition because, frankly, I was kind of sick of the materialism that resulted from easy access to credit in the forms of credit cards, home equity lines, and crazy mortgages. The mini-mansions went up everywhere, and all of them had giant SUVs in the driveways. Meanwhile, I scratched my head wondering how people could afford mortgages for a 2,800-square-foot house and payments on two new cars. I felt like I was missing something.
Obviously, I wasn't. We kept to our financial plan, and I think we're better off than most because of it. But in no way do I feel overly optimistic. I'm like that consumer that all the economists are waiting for to jump back into the spending game.
For this Christmas, however, frugality is the spirit of the season. My son is getting a telescope, and my daughter is getting a cool Stylophone as their showcase gifts. Nothing huge, but something cool. It's actually helped me to enjoy the season a little bit more as I often struggled to find the right gifts and enough time to purchase those gifts.
Simplicity and sincerity, two things that often got lost for me in the holiday season. It's actually pretty nice, and hopefully a sign of greater things to come for all of us, including you, Tiny Tim.
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The Fabricator is North America's leading magazine for the metal forming and fabricating industry. The magazine delivers the news, technical articles, and case histories that enable fabricators to do their jobs more efficiently. The Fabricator has served the industry since 1970.
start your free subscriptionAbout the Author
Dan Davis
2135 Point Blvd.
Elgin, IL 60123
815-227-8281
Dan Davis is editor-in-chief of The Fabricator, the industry's most widely circulated metal fabricating magazine, and its sister publications, The Tube & Pipe Journal and The Welder. He has been with the publications since April 2002.
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