Give Thanks to ‘the 1%’ who do their bit for the Consumer Economy

This week, a hush falls over Christendom. Office phones ring with no one to answer them. Stockbrokers, waiting to score a few more commissions before the end of the year, give up and go home. The malls, flush with shoppers over the weekend, empty out.

But we continue our lonely vigil, watching over the world of money…dumbstruck by the complex majesty of it…

…and a little bummed out by the scammy fraud perpetrated by Fed economists.

Last week, friends and family tried to catch up with one another before the end of the year. Businesses took inventory. Partners spoke to one another for the first time in months, settling accounts for 2013 and trying to gauge the year ahead.

We were no exception.

We drove out of the city to look at a colleague’s new house. The house is on farmland in one of the most attractive suburbs, just 15 minutes from the heart of Baltimore.

It is a huge, rambling affair built in the 1870s with a large wing for servants added in the 1920s. One of Baltimore’s leading lawyers had owned it. His widow lived there until she died in her 90s.

Now, under a new owner, the house is about to get a major facelift. New wiring, new plumbing…walls torn down…a new master suite…an addition for utilities…a four-car garage…a tool shed transformed into a ‘man cave’.

Our friend is not one to hold back. He lives large…no matter what the cost. The house already has more than 9,000 square feet of space. When he’s finished, it will probably have more than 10,000.

You are aware that this is going to cost a fortune,’ we said to the new owner.

Yeah. How much do you think it will cost to fix this place up?

Five million?

Oh, and I’m going to tear up all the floors and put in radiant heat. And a new kitchen.

Six million? This is crazy. It’s a nice house. Why not just live in it as it is? All you really need to do is to put in a new bathroom. Okay, maybe a new kitchen. But why buy a nice old house just to tear it up?

You are such a penny-pincher. What is money for, if you can’t use it to build the house you want where you want it? I don’t get any pleasure out of looking at my account balance. I’ll get real pleasure for many years out of this house.

I don’t mind spending money. It’s fun. I’m not like Warren Buffett. And I’m not like you. I don’t want to live in a simple house in Omaha all my life. And I don’t care about creating a family legacy. I’m going to enjoy my money.

Our friend is an economist’s dream. He consumes mightily. His consumption makes him happy. And it sets in motion hundreds of wheels that turn toward more getting and spending all over Baltimore, the US, and the world.

The Financial Times elaborates:

Consumption is the purpose of economic activity and allows us to meet our material aspirations in the pursuit of happiness.

The valid concern about household debt is therefore not that it is fuelling consumption, but that it might detract from future expenditure because, for prudent families, debt service gets in the way of other spending. The elderly and the dead, who realized their property assets, tend not to spend so much.

Naturally, there are legitimate concerns about the sustainability of the recovery, but most are not related to consumption… Consumption growth is therefore necessary for the sustainable longer-term growth that people of a puritanical bent so desire. The alternative to the unexpected boost to consumption this year would have been much worse: continued stagnation, higher unemployment, lower incomes and worse public finances.

So, as the year’s end approaches, we should resist the puritan within all of us. Let us celebrate consumption this Christmas.

Our friend is doing his part. The marble for his new countertops will be cut in Italy…making employment for stonecutters and shippers.

Carpenters will spend months knocking together frames and staircases.

The work will begin next year. Heating and air-conditioning specialists, architects, wallpaper salesmen, decorators, roofers, electricians, plumbers, surveyors — all will find a little extra good cheer in their stockings for next Christmas.

Will they stop a moment and say a little prayer for the system that has brought them such bounty? Will they say thanks to ‘the 1%’ — the only ones with enough money to take on such big-spending projects?

Not likely. Instead, they will grouse about how little they got and hold the source of it in contempt.

But at least we will raise a glass — or two — in honour of the spendthrifts who keep the wheels turning. And we give special thanks for that little subset of the 1% — those who provide a public good by sacrificing their own balance sheets for the benefit of the consumer economy.

Yes, they will be poorer — financially — but at least they will have nice houses to live in when the next crisis comes.


Bill Bonner
for The Markets and Money Australia

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Bill Bonner

Bill Bonner

Since founding Agora Inc. in 1979, Bill Bonner has found success and garnered camaraderie in numerous communities and industries. A man of many talents, his entrepreneurial savvy, unique writings, philanthropic undertakings, and preservationist activities have all been recognized and awarded by some of America's most respected authorities.

Along with Addison Wiggin, his friend and colleague, Bill has written two New York Times best-selling books, Financial Reckoning Day and Empire of Debt. Both works have been critically acclaimed internationally. With political journalist Lila Rajiva, he wrote his third New York Times best-selling book, Mobs, Messiahs and Markets, which offers concrete advice on how to avoid the public spectacle of modern finance. Since 1999, Bill has been a daily contributor and the driving force behind Markets and MoneyDice Have No Memory: Big Bets & Bad Economics from Paris to the Pampas, the newest book from Bill Bonner, is the definitive compendium of Bill's daily reckonings from more than a decade: 1999-2010. 

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5 Comments on "Give Thanks to ‘the 1%’ who do their bit for the Consumer Economy"

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Five or six million to throw away on uplifting a 1870s house to the 21st Century? All to make it like all the other McMansions in the USA? Just to pay more property taxes as soon as the county adjustor gets back into his car when it is all said and done?

Spend half that to make the house a “retirement bunker” and go off-grid with solar panels, a windmill, etc. Start a garden and get a dog. Be prepared for the Crash.

This is what makes the middle-class American shake his head in disbelief.


This article is as shortsighted as the “basement beneath the wage floor” article on the US site. All that is missing are a few fallacious analogies.


What everyone should do is give thanks to cheap oil. Without that we would all be well and truly up Shit Creek. All the ‘economic’ growth, demographic ‘growth’ and the happy decadent materialistic lifestyle under the American Hegomony is permitted by cheap oil. Benny’s printing press and our bribe-bloated political systems and all their foolish ideology is also permitted by cheap oil.

Everyone should get on their hands and knees and bow down to cheap oil, for when it ends…well?

…most people of means prefer renovation over restoration, they value virginity over wisdom. In the mind of every 1%er there lurks a “mad king ludwig” who can be catered to while the other 99% through the experience of their financial circumstances feign the wisdom to ignore his pleas. Perhaps the one true God of the romans is MARBLE itself, and your friend’s house in completion will be an unconscious tribute to our blessed Virgin Mary, with your friend who lives inside her walls as a sort of Christ figure(in his own imagination) who in death will be released from the… Read more »

What is saved is spent. If i place 40 million in the bank would not the bank lend that money out? Economies grow on savings and production not on consumer spending.

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