oftwominds-Charles Hugh Smith

The Dematerialization of America
March 12, 2009

Dematerialization needn't involve rayguns. It is the process of an economy with too many material goods losing the excess through attrition.

It's been far too long since we posted a haiku, and longtime correspondent Jed H. broke the drought with this little gem:

Rampant Fraud and Greed
Bernie and Banks stole BILLIONS
Great Depression TWO ? (or TOO?)

Thank you, Jed--excellent. Hopefully your creativity will inspire other readers to work the 5-7-5 syllable form of haiku.

Along similar lines, "A California Yankee in Arthur's Pass National Park" sent in this clever reworking of a classic 60s TV ditty:

With apologies to Mr. Ziffel...

Greenspan Acres is the place to be.
Tent livin' is the life for me.
Homeless spreadin' out so far and wide
Keep my foreclosure, just give it back to countrywide.
Back home is where I'd rather stay.
I got allergic to having to pay.
I just adore the poorhouse view.
Dah-ling I love it, but it ain't no Park Avenue.

...No stores.
...Out doors.
...Fresh air.
...Despair.

You are my dive.
Good bye, city life.
Greenspan Acres we are there.

California Yankee also offered these comments about life in the Iron Curtain countries after the Soviet Empire crumbled. Since his familywas from "the old coutnry," his report is first-hand:

What's about to happen to the USA is a complete and utter flip-flop, compared to the fall of communism, some 20 years ago.

Very few people in our country really understood what life behind the iron curtain was like, and many that complain about pending socialism here currently, should be much more concerned with the idea of pending communist-like shopping possibilities.

When the wall came tumbling down a score of years ago, the lion's share of people previously in its shadow were only too happy to see communism go, as it really was a "we pretend to work and they pretend to pay us and how nice it is to pretend the stores have anything to sell" based economy. How bad was it, you might inquire?

It was standard operating procedure for my parents to each pack a roll of toilet paper in anticipation of there not being any in any public toilet, nor could the idea of buying some there be assured either, when they would travel back to the land of my father, in the 1970's.

The various countries caught behind the curtain all had their own currencies, which in theory had set exchange values, but in reality on the black market were worth a fraction of stated value. It wasn't uncommon for my parents to get offered 3-4x the "official" rate in local currency for their Yankee Dollars, but what could one buy with it? The stores had plenty of nothing.

What was the reasoning that caused ordinary citizens to risk going to jail in attempting to procure Dollars from my parents? There were "hard-money" stores that had many items for sale that were generally unavailable, the only catch being they only took Dollars/Marks/Pounds etc.

The fall of communism wasn't a collapse, as in a proper collapse scenario, nobody fills the void and things fall apart. Capitalism filled the void.

When communism went away, so did empty shelves. For the 1st time in virtually everybody's life, there was soon a cornucopia of consumer goods to choose from, like going from nothing to plenty virtually overnight.

The fall of capitaism will be a proper collapse scenario, who's gonna fill the void?
When capitalism goes away, so will full shelves. For the 1st time in virtually everybody's life, there will be a dearth of consumer goods to choose from, like going from plenty to nothing virtually overnight.

Can you imagine how lost people of a certain age were after the fall of communism, as it was all they knew and it's hard to teach an old dog new tricks?

That's the hurdle facing us.

Thank you, California Yankee for this report.

While I confess my crystal ball is a bit cloudy, I foresee not so much empty shelves as empty storefronts. If you go to the remaining Wal-Marts and Targets, the shelves will be as loaded as they are now--but few will have the surplus cash or credit to be buying.

What will be empty is all the storefronts which once housed retails outlets selling superfluous goods. The storefronts occupied by ethnic groceries--yes, we all have to eat, and their prices are lower than Safeway's--will still be bustling.

The malls will be empty, barricaded, ghostly, but the swap meets will be crammed with people still programmed to consider acquisition their primary form of entertainment, purpose, therapy and socializing. Since many if not most will have few surplus dollars to spend, the main fun will be looking, not buying.

Dematerialization in my view will occur much like the mass unemployment we will experience: by attrition, by erosion, not by a sudden collapse. Another store will give up the ghost and close, another mall will surrender to the inevitable, another auto dealership will shutter, and so on.

The family with three cars will get by on two when the third one becomes too costly to repair; the family with two cars will get by with one, and some of those living in locales with decent public transport or cycling weather will sell their only care and get by with transit, ride-sharing and a bike or scooter.

Please see my latest addition to the blogroll in the right column, Imagine No Cars for more.
Many people believe we will have shortages of goods. I respectfully disagree for these reasons:

1. The export model has no Plan B. Asian and European nations which have prospered by exporting to the U.S. have no Plan B; their domestic demand is simply too low to support their manufacturing sectors. They literally have no choice but to keep trying to sell to the U.S. consumer, even at a loss, lest they face insurrection from millions of unemployed.

2. Retail has no Plan B except to close. Retail, like a shark, must keep moving forward or it dies. Some retail will remain in business and it will survive by selling at deep discounts.

What we will have is not a shortage of goods but a shortage of surplus cash and credit. All the "free money" lines of credit (home equity lines, credit cards with $29,000 limits, etc.) will get pulled and that alone will put consumer largesse in deep freeze for years to come.

Dematerialization is an endless garage sale. As people move out of huge recently-built homes stuffed with furniture, skiis, three TVs, etc. and move into apartments or much smaller dwellings, they will sell or give away the surplus they no longer have room to store. People who declare bankruptcy will get rid of all the stuff in their storage lockers.

The surplus of an entire generation of consumerist excess is stupendous. Much will end up in landfill because it was poorly made or poorly maintained or both. Quality goods will be sold for pennies on the dollar because there are too many of everything. Our car is 10 years old and will last another 10 years without any major effort (it was made in Kentucky). I have a leather jacket that's 20 years old and is a bit worn but it still keeps me warm. My bicycle is basically a forever machine; so are my hand tools. You can make your own list of stuff which will last for many years if not decades.

As California Yankee observed, the real "shock to the system" will be to those for whom consumption, acquisition of another material object and the act of shopping formed their identity, their pastime and their quest for status/self-worth. Dematerialization will change the national focus in a number of ways. I was discussing status and retail with my old friend G.F.B. recently, and he commented that people will still want visible status symbols; but they will no longer be handbags plastered with a "luxury" brand name. That is out, declasse, gauche, embarrassing.

What will be "in" and chic will not be gaudy designer-label goods but hand-adorned generic clothing and the like. Luxury cars will become declasse, and superficial conspicuous consumption will be reviled by the very consumers who followed that false god right over the cliff.

Dematerialization is what happens when the velocity of money falls to near-zero. When people have to save up to buy an item cash, they will buy far fewer goods than when they could pile up tens of thousands of dollars in credit card debt. When people don't buy a new car and house every three years, they will generate zero transaction/loan fees--the very churn which fueled the false prosperity of the last decade.

The invisible ray of credit contraction and decelerating money is dematerializing the nation. We can mourn what has been lost or celebrate the passing of a scourge.

New essays and readers' comments in Readers' Journal.

NOTE: The serialization of my new ebook "Survival +" starts March 21. Of Two Minds reader forum (hosted offsite, reader moderated)

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Quick Easy Vegetable Soup and Pork Butt Stew.

New Operation SERF Installment:
Operation SERF, Part 11
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