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Old 02-19-2009, 03:02 PM   #21
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At the turn of the century there was the "craftsman" movement. It wasn't just a style of furniture or home, it was an entire idealized lifestyle, the value of which is still appreciated today. We need a new such movement. Instead of buying a particle-board table made overseas to the cheapest standards that lasts a year, with thrift we can purchase a table that may cost 10 times more but will be an object of beauty that retains its value and will be passed on to a future generation, made by a local artisan / craftsman who loves his work.
One person's "idealized movement" is another person's "head-in-the-sand yearning for a yesteryear that never was." There may be a small group of people who want to pay $100 for a pair of hand-crafted shoes, but it's a small group-and mostly they are on communes and don't wear shows in the first place. And, there may be Americans whose lifelong aspiration is to be a cobbler, toiling all day to turn out one pair of shoes. These groups of people are free to seek each other out for their mutual benefit.
There is a "quality curve" that we addressed in a simultaneous thread, and there's value in moving up the curve to the point that each dollar gives the best value. But, there's a limit. I've got some particleboard furniture that has served me well for over 20 years (and it was made from tree by-products plus a lot of nasty chemicals--but not a single tree was felled to make it).
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Old 02-19-2009, 03:23 PM   #22
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....now the party is over.

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"The party's over. Take off your makeup." Say it ain't so and take another look at Ha Ha's signature line.
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Old 02-19-2009, 03:32 PM   #23
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Samclem, I did acknowledge that it was an "idealized" lifestyle, but it's quite true that it's still a respected one today. I offered it as an old and perhaps still valid model of how we might escape from the "race to the bottom" that the world seems to be in. That's not putting your head in the sand, it's offering a taste of hope. What's yours?
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Old 02-19-2009, 03:42 PM   #24
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By the way, in the "race to the bottom" and in "going down-market", even Ikea (I thought they had won the race already) is finding that plastic-laminated particle board is too high-end. A lot of their new furniture is being made out of a strange foamy plastic or hybrid plastic/pulp substance.
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Old 02-19-2009, 04:31 PM   #25
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Samclem, I did acknowledge that it was an "idealized" lifestyle, but it's quite true that it's still a respected one today. I offered it as an old and perhaps still valid model of how we might escape from the "race to the bottom" that the world seems to be in. That's not putting your head in the sand, it's offering a taste of hope. What's yours?
I guess I don't know what a "respected lifestyle" is. Stickley furniture and Greene & Greene houses are beautiful. Sarah Susanka and the "small house" "movement" is one I understand and find agreeable.
But, what happened to Gustav Stickley? He couldn't turn a profit by making hand-made furniture of fumed oak. People didn't want to pay what it costs. In general, they still don't. Maybe that will change, but I don't see how.
What's my vision for America's future? We still have many competitive advantages in the world market. Manuafacturing of some items can come back here if our taxes are low and our wage rates come down. In addition, we can design good products even if we don't build them here. Our country has advantages in transportation and capital availability that few countries can match, and most people still speak English, which is a plus. If we stay "lean" as a society (low tax rates, low government-induced drag on business) we can compete in the world market. If we saddle ourselves with regulatory and taxation handicaps, we cannot hope to compete on the world market. I haven't met anyone who thinks our government or populace is presently in the mood for smaller government. So, I'm not optimistic--yet. There will have to be more pain before attitudes adjust, unfortunately.
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Old 02-19-2009, 04:42 PM   #26
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When you outsource your manufactoring base a decade later you outsource your quality of life.

Happens every time.
I don't believe this is true. In the 70's and 80's the UK lost most of its manufacturing base - Cars, Steel, Ship Building, Coal Mining all gone, but the economy thrived in the 90's and quality of life has not suffered.
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Old 02-19-2009, 04:48 PM   #27
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I don't believe this is true. In the 70's and 80's the UK lost most of its manufacturing base - Cars, Steel, Ship Building, Coal Mining all gone, but the economy thrived in the 90's and quality of life has not suffered.

Hmm, wasn't all that substantially replaced by their becoming (even more of) a financial capitol of the world, complete with a real-estate bubble that made the U.S. bubble look penny-ante?
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Old 02-19-2009, 04:49 PM   #28
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Pundits, and others that write articles, are real good at predicting the continuation of a current trend. When things are good, things are going to get better, when housing prices are climbing, the are going to even go higher, the stock market will be 15,000 by the end of 2008, and below 6000 by the end of 2009!

If any of them were really good they would be really rich, retired, and writing on this board for free!
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Old 02-19-2009, 04:49 PM   #29
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Interesting discussion.

I've thought for many years that the upward spiral of the standard of living would have to come to an end or at least slow down. Neither of those possibilities bothers me too much. I can adjust to a gradual shift. What is frightening is the "collapse" of our standard of living which may be in the works. When the net lenders decide to stop lending, the party will truly be over. Then, we might find ourselves back in "the good old days". Except they weren't all that good - and it will be difficult to adjust.

Since the majority of posters so far seem to believe we are at the end of an era (post WWII boom or bubble) do we have strategies to deal with this scenario? I have built considerable slack into my FIRE plan, but if the whole game has changed, I'm not sure there are any obvious moves. We don't even know if we're headed for deflation or inflation in the future. Makes planning problematic, especially for those of us who've already committed to retirement.

I'm pessimistic by nature, but it sounds like I'm not the only one at this point.
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Old 02-19-2009, 05:04 PM   #30
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Since the majority of posters so far seem to believe we are at the end of an era (post WWII boom or bubble) do we have strategies to deal with this scenario? I have built considerable slack into my FIRE plan, but if the whole game has changed, I'm not sure there are any obvious moves.
I don't think the whole game has changed. I just think expectations have to be reset. The things that have historically been the right thing to do -- working hard, investing wisely and aggressively (age appropriate), and a simple LBYM lifestyle -- will continue to be the best way to secure your financial future, but I think the expected payout will be a bit lower.
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Old 02-19-2009, 06:01 PM   #31
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Hmm, wasn't all that substantially replaced by their becoming (even more of) a financial capitol of the world, complete with a real-estate bubble that made the U.S. bubble look penny-ante?
Absolutely agree, that disputes the statement

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When you outsource your manufactoring base a decade later you outsource your quality of life.

Happens every time.
Accepting the fact that the loss of manufacturing is a sure thing to losing your quality of life is not the attitude that made America great.
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Old 02-19-2009, 07:09 PM   #32
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I have no evidence, but I suspect our *real* standard of living -- inflation-adjusted and without including borrowed prosperity -- has mostly been falling for at least 20 years and maybe longer.
Another factor contributing to a fall in the standard of living was the fact that it took two salaries rather than one for families to afford the material things that Americans and others began to take for granted. As the vicious cycle took hold, then came the debt...

When I first went to live in the US (from Europe) many years ago, I found the conspicuous consumption very, well, conspircuous. At the time it did occur to me that it felt like the Roman Empire, and I mused whether it would be subject to the same fate.
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Old 02-19-2009, 07:13 PM   #33
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As I mentioned in another post we saw similar predictions after 9/11 - it didn't happen.

Permanent changes will depend upon the length and depth of this recession.

I don't thing it will change much.

Once the recession is over we will see stories about Americans spending again.
I agree. Spending will be reduced as long as we have a bad recession. And that may be for a long long time. But when ever we do get out of this thing, spending will pick up again. BTW, I haven't cut my spending. If I did, I would have to disconnect my electricity. Certainly not cut on golf.
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Old 02-19-2009, 07:24 PM   #34
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Don't you think that spending may be restricted for a good while at least not by what consumers would like to do, but by what lenders and asset prices will allow them to do?

I really don't think that many people will ever go back to old time frugality (except of course those on this board) but they may be forced by circumstance to throttle back, even after employment picks up again.

And retirees may be premanently constrained. I think it is possible that many retirements that began around 1998-99-2000 may be busted already. Not because the losses have been or will necessarily be greater than ever before, but because 4% of an outrageously overvalued portfolio is just too much to draw over time.

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Old 02-19-2009, 07:42 PM   #35
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Saw it. ? Cheap Bastardhood - with panache.

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Old 02-19-2009, 07:44 PM   #36
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Those who borrowed a higher standard of living than they could afford will see their quality of life decline. But it is wrong to extrapolate that idea too broadly, as many tend to do. U.S. wealth isn't a mirage. It is a function of worker productivity where the U.S. still ranks #1. And hardly resting on our laurels, the gap between the U.S. and the rest of the developed world has actually been growing in recent years.

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the report also shows that the productivity gap between the US and most other developed economies continued to widen. The acceleration of productivity growth in the US has outpaced that of many other developed economies: With US$ 63,885 of value added per person employed in 2006, the United States was followed at a considerable distance by Ireland (US$ 55,986), Luxembourg (US$ 55,641), Belgium (US$ 55,235) and France (US$ 54,609).
New ILO report says US leads the world in labour productivity, some regions are catching up, most lag behind [Press releases]

What's more, standards of living aren't a zero sum game. It isn't true, despite what seems widely assumed, that if developing countries improve their standard of living than ours necessarily needs to decline. As India and China, and elsewhere become more productive, their standard of living increases, and the world becomes richer in aggregate.
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Old 02-19-2009, 07:48 PM   #37
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What's more, standards of living aren't a zero sum game. It isn't true, despite what seems widely assumed, that if developing countries improve their standard of living than ours necessarily needs to decline. As India and China, and elsewhere become more productive, their standard of living increases, and the world becomes richer in aggregate.
I agree, which is part of the reason I believe protectionism would be a mistake. When India and China rise, it may put a damper on our growth, but in the end if they gain $10 and we lose $1 ultimately the world economy is $9 richer.
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Old 02-19-2009, 08:02 PM   #38
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Another factor contributing to a fall in the standard of living was the fact that it took two salaries rather than one for families to afford the material things that Americans and others began to take for granted.
Two salaries that are buying tons more stuff. Houses are much bigger and have air conditioning, one small car has been replaced by 2 large ones, one telephone vs. several, one T.V. used to get a couple of channels for free vs. several much larger T.V.'s that are all now equipped with cable, TIVO, DVD players, and surround sound, a vacation used to mean hoping in the car whereas now it often means hoping on a plane.

Not to mention that both couples have the luxury of pursuing careers now because of all of the other things we buy that make such choices possible (dishwasher, clothes washer, dryer, child care, etc.).

And what other generation enjoyed the luxury of even considering something as crazy as "early retirement"?

Maybe I'm missing something, but when talking about standards of living, I wouldn't trade living in the U.S. today for living in any previous decade or in any country in the world in all of history.
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Old 02-19-2009, 08:13 PM   #39
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Those who borrowed a higher standard of living than they could afford will see their quality of life decline. But it is wrong to extrapolate that idea too broadly, as many tend to do. U.S. wealth isn't a mirage. It is a function of worker productivity where the U.S. still ranks #1. And hardly resting on our laurels, the gap between the U.S. and the rest of the developed world has actually been growing in recent years.

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the report also shows that the productivity gap between the US and most other developed economies continued to widen. The acceleration of productivity growth in the US has outpaced that of many other developed economies: With US$ 63,885 of value added per person employed in 2006, the United States was followed at a considerable distance by Ireland (US$ 55,986), Luxembourg (US$ 55,641), Belgium (US$ 55,235) and France (US$ 54,609).
New ILO report says US leads the world in labour productivity, some regions are catching up, most lag behind [Press releases]

What's more, standards of living aren't a zero sum game. It isn't true, despite what seems widely assumed, that if developing countries improve their standard of living than ours necessarily needs to decline. As India and China, and elsewhere become more productive, their standard of living increases, and the world becomes richer in aggregate.
I'd be interested to know what the ILO used to compute the value of the goods and services produced inthe US. I think many people wonder if the productivity they are measuring is real or some inflated thing based on the pushing of papers and doing esoteric financial transactions. For example, how does the ILO figure the value of the goods and services produced by a real estate agent? Is it just the value of the commissions he/she earned--which were in turn based on inflated home prices and a super-churning housing market fueled by easy cash? How about bankers, insurance agents, appraisers, etc. Even doctors-- Does the ILO value a tonsillectomy performed in the US the same as the tonsillectomy "product" produced in Botswana? I think the ILO probably can easily figure out the value of crates of sneakers and TVs shipped from China, but I don't know if they can do an accurate job figuring out the value of this intangible "production" in the US. I suspect it is partially a mirage.

Also note that while US workers may be the most productive, that doesn't mean that a dollar spent on labor costs inthe US buys more productivity than anywhere else. Far from it. It might just mean that the $75/hour US factory worker produced $200 in products, while the $5/hour Indonesian worker produced $199 in products. That's a tradeoff businesses are willing to make, and why factories are leaving the US despite higher US productivity (if it really is higher--see above).
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Old 02-19-2009, 08:17 PM   #40
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Adding to what Meadbh wrote, it's almost impossible for people to truly go back to the "old" frugality. They are trapped in a "live to work" lifestyle by the devaluation of labor through the double-whammy of women entering the work-force and now overseas outsourcing, resulting in stagnant and declining wages (in real terms, at least). It is no surprise that the value of labor has fallen to just the level at which it barely makes sense for both members of a couple to work, resulting in a great deal of financial fragility.

Perhaps the only way for "good old" frugality to return is if two-income families are forced to give up one job due to massive unemployment. The value of labor will drop even further until it no longer pays for both to work (and things needn't fall far for that to happen). Then, families might move out of the echoing McMansion (or those homes will be devalued until affordable enough), ditch the second or third car, the house-cleaning person, halve their dry cleaning bills, do away with the expensive child day care, etc.

Of course, this is an extreme scenario that would involve staggering pain until a new equilibrium is reached. Much more likely is a milder middle ground in which people's consumption is more gently restricted.
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