America is no longer a land of opportunity
A recent poll shows Americans cutting back on their spending. That might not sound like a very big deal, but it could be the end of the American dream.
A poll out from the US last week made for rather sad reading. It showed how Americans are working to save money within their households.
67% of them have been buying more generic brands; 46% say they have been bringing their own lunch to work; 31% have cancelled one or more magazine subscriptions; 22% have cancelled or cut their cable TV services. Finally, 22% have stopped buying coffee in the morning.
You might say this isn't a big deal. After all, spending $2.50 on a cup of coffee every morning is just silly. And who needs to watch as much cable TV as the average American anyway?
But it is a big deal. For decades now the US has been the land of opportunity, the place everyone goes to see their living standards rise, not fall.
I went to the US for the first time as an 11-year-old immigrant from Ireland via rural Somerset in the 1970s. I still have fixed in my head a vision of the first supermarket shelf I ever saw in America. You didn't get much choice in the average small shop in Tipperary or Langport back then (you probably still don't), so just going into a mall in Chicago for a quick look represented a major rise in my family's standard of living.
So the fact that the average American is now seeing a fall in their living standards is desperately depressing for me and the millions of others who have at some point hit its shores thinking that things can only get better. Doubly depressing is the fact that things can only get worse.
It is hard to see how the prices of staple foods can fall in the US. The drought hasn't been good for grain harvests and farmers across the Southwest and Midwest have been cutting their cattle herds as well. So dairy and beef prices should start rising again soon too.
At the same time, Americans are at some point in the not-too-distant-future going to have to accept falling services and rising taxes (whatever happens about the debt ceiling). Kenneth Rogoff and Carmen Reinhart's now famous study of the effects of public debt on private growth make it pretty clear that once public debt tops 90% of GDP, you can't expect much in the way of GDP growth. And without growth you can't grow your way out of debt.
As our own Bill Bonner always says and was quoted this week by Jeff Randall as saying "not many people can afford to live like Americans; the trouble is, neither can they."