00:00:00
Americans are the best consumers on the
00:00:01
planet and it's really not even close
00:00:04
the runner up is China and they spend
00:00:06
less than a third of what we do in any
00:00:09
given year even though they have almost
00:00:11
five times as many people it might not
00:00:13
always feel like it but by global
00:00:15
standards we are incredibly Rich we love
00:00:18
buying and we aren't afraid of
00:00:20
going into debt to keep doing it more of
00:00:23
our economy depends on the consumption
00:00:24
of goods and services than basically any
00:00:26
other major country in the world but
00:00:28
this has to have a limit right as a
00:00:30
direct result of our own insatiable
00:00:32
desire to consume our household savings
00:00:34
rates are now the lowest they have ever
00:00:36
been and high-risk High interest
00:00:37
consumer lending has surpassed a
00:00:39
trillion dollar that doesn't include
00:00:41
things like car loans Home Loans student
00:00:43
loans medical loans or informal lending
00:00:45
like buy now pay later which are also
00:00:48
approaching all-time highs so what is
00:00:50
going to happen to the best consumers on
00:00:52
the planet if they can't afford to
00:00:53
consume anymore and more importantly
00:00:55
could we solve all of our problems by
00:00:57
just buying less the of debt is
00:01:00
getting deeper but there are indications
00:01:03
that some are doing a better job
00:01:04
Treading Water Americans taking on more
00:01:06
auto loan debt than ever before it's
00:01:08
probably because they're just rejoicing
00:01:10
at the fact that they can get a car
00:01:11
again holy be je I don't know if I can
00:01:13
do this but I need the car Amazon Target
00:01:16
at Walmart are already offering
00:01:17
discounts to Consumers don't make enough
00:01:19
money to meet the minimum cost of living
00:01:21
in New York City and nearly 80% of
00:01:23
households are considered housing
00:01:25
burdened which means more than 30% of
00:01:27
household income is going towards rent
00:01:31
according to data from the World Bank
00:01:33
America is responsible for about a third
00:01:35
of all consumer spending worldwide even
00:01:37
though we only represent 4% of the
00:01:39
global population according to the same
00:01:41
report consumer spending is now 69% of
00:01:44
our total economy for comparison in the
00:01:46
second largest consumer Market in the
00:01:48
world China consumption only accounts
00:01:50
for 38% of their GDP now that might be a
00:01:53
bit of an unfair comparison outside of
00:01:55
its major cities China still has a lot
00:01:57
of people who are very poor and don't
00:01:59
buy things Beyond The Bare Essentials
00:02:01
the European Union is a more comparable
00:02:03
peer but when counted as a single group
00:02:05
only 51% of their GDP is tied up in
00:02:07
consumer spending and as time goes on
00:02:09
they are spending less and less while we
00:02:11
are spending more by basically any
00:02:14
metric Americans are the best consumers
00:02:16
on the planet and this wasn't by
00:02:18
accident after the second world war
00:02:20
America had a problem the industrial
00:02:22
Juggernaut we had built up to fight the
00:02:24
war in Europe and the Pacific no longer
00:02:25
needed to make planes tanks ships and
00:02:28
Munitions for the war effort after the a
00:02:30
Great Depression the government really
00:02:31
didn't want to let these factories go
00:02:33
idle so a continued policies first
00:02:35
pushed by the New Deal to encourage
00:02:37
consumer spending to give those
00:02:38
factories and their workers something to
00:02:40
feed the problem suddenly became that
00:02:42
the market was saturated with goods and
00:02:44
services and there was presumably a
00:02:45
limit to what people would buy it was at
00:02:48
this point that modern madman style
00:02:50
advertising became a thing as companies
00:02:52
now needed to create demand rather than
00:02:54
just catering to the demand that already
00:02:55
existed a not so fun fact is that a lot
00:02:58
of the men that honed their craft
00:02:59
created propaganda for the first and
00:03:01
second world war pivoted to advertising
00:03:03
where they could use their skills to
00:03:04
sell products instead of selling the
00:03:06
nation's War efforts the historian
00:03:08
Kenneth Jackson noted in his book crab
00:03:10
grass Frontier that the year after the
00:03:12
war ended there were only eight
00:03:13
self-contained shopping centers in
00:03:15
America most purchases were still done
00:03:17
at local Standalone stores that catered
00:03:19
to the essentials for everyday life just
00:03:21
14 years later though at the start of
00:03:22
the 1960s there were over 4,000 shopping
00:03:25
centers across the country all vying for
00:03:27
their sweet sweet consumer dollars at
00:03:30
this time most of the other major
00:03:31
economies around the world had the more
00:03:33
immediate problem of rebuilding their
00:03:35
factories and infrastructure that were
00:03:36
destroyed during the war only after that
00:03:39
did they have to start worrying about
00:03:40
what to do with their extra industrial
00:03:42
output this gave America a head start in
00:03:45
consumerism that has been hard to catch
00:03:46
up to so that's the incredibly brief
00:03:49
story about how we got here but what
00:03:51
does this actually mean for us today
00:03:54
apart from creating a general culture of
00:03:55
consumerism the undermining of personal
00:03:57
financial stability corporate
00:03:58
consolidation resource depletion and
00:04:00
waste generation there are three less
00:04:03
obvious but more immediate problems that
00:04:04
consumer first economic policies have
00:04:06
created and two very important reasons
00:04:08
why we can't really afford to get off
00:04:10
the treadmill of consumption the first
00:04:12
problem we slowly created for ourselves
00:04:13
is that consumerism made luxury
00:04:15
convenience and experience cheap but
00:04:17
everyday life expensive the optimization
00:04:20
of Industry combined with globalized
00:04:22
trade finance and shared expertise has
00:04:24
made consumer goods incredibly cheap by
00:04:26
historical standards adjusted for
00:04:28
inflation in the 19 60s an airline
00:04:30
ticket from New York to Europe would
00:04:32
cost $66,000 a fridge $4,000 a massive
00:04:35
21in color TV was almost
00:04:38
$9,000 a home microwave oven produced by
00:04:41
rathon was $5,000 and even modest Home
00:04:44
Furnishings were worth the equivalent of
00:04:45
tens of thousands of dollars today added
00:04:48
together these consumer goods and
00:04:49
services that probably seem pretty basic
00:04:51
to you were collectively worth as much
00:04:53
as a house that's because back then
00:04:55
consumer goods were luxuries but housing
00:04:58
was a pretty basic purchase today Global
00:05:00
industry has made consumer goods
00:05:02
extremely cheap but constrained
00:05:03
resources like land very expensive you
00:05:06
could go on an extended European
00:05:08
Vacation buy the latest array of
00:05:09
electronics and home appliances and
00:05:11
probably spend less than a few months
00:05:13
rent all of these Goods combined
00:05:15
wouldn't add up to a down payment on a
00:05:17
home in most cities let alone an
00:05:19
outright purchase now hot take alert but
00:05:21
a lot of this stuff is actually pretty
00:05:23
great fridges washing machines and
00:05:25
modern computers do make our lives
00:05:27
better and easier even modern service is
00:05:29
like well you know YouTube can be great
00:05:33
if consumed in moderation and I am not
00:05:35
just saying that because I am a dirty
00:05:36
stinking hypocritical Creator modern
00:05:39
conveniences have improved our lives and
00:05:41
if consumerism stopped there we could
00:05:43
probably have found a happy balance
00:05:44
between cheap modern amenities without
00:05:46
the trade-offs that came with it but the
00:05:48
problem was it was almost impossible to
00:05:50
stop it there building an economy on
00:05:52
consumers meant we had to keep on
00:05:54
consuming so it's time to learn how
00:05:56
money Works to find out what happens
00:05:58
when we are finally full
00:06:00
this video is sponsored by grammarly
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gramley is completely free to try just
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sign up and download using my link in
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the
00:06:53
description it's the easy and trendy
00:06:55
thing to write off consumerism as just a
00:06:58
generically bad thing
00:07:00
so as much as I would love to make an
00:07:01
easy video about how consuming modern
00:07:03
goods and services is everything wrong
00:07:05
with the world there is a little bit
00:07:07
more to it than that a lot of things we
00:07:09
consume genuinely increase our standard
00:07:11
of living and quality of life somewhere
00:07:13
between you leaving Society behind to
00:07:15
live off the land and taking out a buy
00:07:17
now pay later loan for a teu order is
00:07:19
some happy medium of spending on
00:07:20
consumer goods and services economists
00:07:23
call the simple idea the law of
00:07:24
diminishing marginal utility where as
00:07:27
consumption increases the additional
00:07:28
satisfaction utility gain from each
00:07:30
additional unit consumed Falls normal
00:07:32
humans just call it not overdoing things
00:07:35
and the strongest evidence to support
00:07:37
the idea that we are overdoing things is
00:07:39
that consumption is actually
00:07:41
surprisingly Equitable according to data
00:07:43
prepared by the US Bureau of Labor
00:07:45
Statistics the Louis quintile households
00:07:47
spent approximately $1.37 trillion on
00:07:49
personal consumption in 2022 the top 20%
00:07:53
of households on the other hand spent
00:07:54
just over $6 trillion this still means
00:07:57
that the wealthiest households are
00:07:58
spending more than4 times as much on
00:08:00
consumer goods and services as the
00:08:01
poorest households but that's still
00:08:03
relatively equal considering that the
00:08:05
top 20% of households earn more than 14
00:08:08
times as much so what does this tell us
00:08:11
it shows that for most people there is a
00:08:13
basic level of consumption that is
00:08:15
needed to live a normal life and
00:08:17
especially here in America there are
00:08:18
certain expenses that are really hard to
00:08:20
avoid according to the report the
00:08:22
biggest cost for most people was
00:08:24
unsurprisingly housing housing can't be
00:08:27
mass produced in a factory on the other
00:08:29
of the world like most consumer goods so
00:08:31
it's become really expensive we have
00:08:34
already covered that problem transport
00:08:36
was the other major cost for most
00:08:38
households as in most parts of the
00:08:40
country you need a car to get around and
00:08:42
for lowincome households that is a
00:08:44
serious Financial commitment this can
00:08:46
also be traced back to the consumer boom
00:08:48
of post-war America as lobbying from the
00:08:50
automobile industry to build
00:08:52
car-friendly cities and the mass
00:08:53
adoption of remote single family
00:08:55
Suburban developments meant that most of
00:08:57
America was built around the car the few
00:08:59
East Coast cities that are either
00:09:00
walkable or have reliable public
00:09:02
transportation are unrealistically
00:09:04
expensive for low-income households in
00:09:05
other ways so without a lot of
00:09:07
sacrifices most people are forced into
00:09:09
owning a car personal spending on
00:09:11
Healthcare is also a uniquely American
00:09:13
budget item that pushes up our numbers
00:09:15
Without Really delivering results any
00:09:16
different from those Godless Freedom
00:09:18
hating Europeans either way it's easy to
00:09:21
blame consumerism on consumers but a lot
00:09:23
of these expenses are extremely hard to
00:09:25
avoid even if people don't have the
00:09:27
money to pay for it according to to the
00:09:29
same report this consumption of the beer
00:09:31
Essentials meant that the bottom 20% of
00:09:33
households were spending
00:09:35
$727 more than they made after taxed
00:09:37
every year now you might be wondering
00:09:40
how can a household spend more money
00:09:41
than it makes every single year the
00:09:43
answer is debt of course but also the
00:09:46
people in the bottom 20% change every
00:09:48
year if someone loses their job and it
00:09:50
takes them a while to get work again
00:09:52
they may end up in the bottom 20%
00:09:54
temporarily until they find a new job
00:09:56
and jump back up to whatever income
00:09:57
bracket they were in before this means
00:10:00
that they will go through their savings
00:10:01
or rack up debt to keep themselves
00:10:02
functioning but they should be able to
00:10:04
recover once they are back on their feet
00:10:06
An Inconvenient side effect of this
00:10:07
consumer-driven debt is that people in
00:10:09
debt also make for better more motivated
00:10:12
workers because they need to work or
00:10:14
else Studies by the National Institute
00:10:16
of Health found that workers with high
00:10:18
levels of debt were less likely to
00:10:19
change jobs more likely to work on paid
00:10:22
overtime and less likely to make demands
00:10:23
for better pay and benefits now even if
00:10:26
you are responsible with your borrowing
00:10:28
it can be really hard to maintain modern
00:10:29
living standards as more of what we
00:10:31
consume transitions to being
00:10:33
subscription based even if you do save
00:10:35
diligently for purchases sometimes it's
00:10:37
not even possible to pay upfront anymore
00:10:40
so you need a regular income to make
00:10:41
sure you can cover next month's round of
00:10:43
automated deductions from your bank
00:10:45
account whether it can be from American
00:10:46
Express Netflix Hulu afterpay your
00:10:49
student loans car loans AT&T Adobe
00:10:51
Creative Cloud Microsoft Game Pass
00:10:53
pelaton or if you are a true power
00:10:55
consumer all of them at once if you lose
00:10:59
income for any reason you don't actually
00:11:01
own anything to tide you over so it's a
00:11:03
lot easier to fall behind a lot faster
00:11:06
now the bad news is that as Jobs become
00:11:08
less secure regular layoffs become the
00:11:10
corporate norm and work becomes less
00:11:12
formal most people are going to
00:11:14
experience this fun little Financial
00:11:15
roller coaster at some point in their
00:11:17
life career data from the FED showed
00:11:19
that at the height of the pandemic era
00:11:21
stimulus the fastest growing share of
00:11:23
retail consumer spending came from
00:11:25
low-income earners this was simply
00:11:27
because stimulus checks let them make
00:11:29
purches that they weren't able to afford
00:11:31
before since then growth in spending
00:11:33
from high income earners has more than
00:11:35
doubled that of low-income earners
00:11:37
companies have seen pandemic era wealth
00:11:38
accumulation and gone up Market on most
00:11:41
of their items catering to the group of
00:11:43
consumers that still has purchasing
00:11:44
power so if anybody really has the power
00:11:47
to stop their consumption it's high
00:11:48
income earners and on an individual
00:11:50
level that's probably a really good idea
00:11:53
a report by The Wall Street Journal has
00:11:55
found that the US economy as a whole now
00:11:57
depends more on the spending habits of
00:11:59
the top 10% than ever before because
00:12:01
they are the only ones that can reliably
00:12:03
afford high margin non-essentials in
00:12:05
such a consumer Centric economy
00:12:07
protecting those rich people who are the
00:12:09
consumers becomes the most important
00:12:10
objective even though protecting workers
00:12:12
would be a better long-term solution
00:12:14
because better paid and more productive
00:12:16
workers turn into consumers anyway an
00:12:19
alarming amount of extremely high income
00:12:20
earners are living paycheck to paycheck
00:12:22
because companies have gotten so good at
00:12:24
making sure that there is always
00:12:25
something to purchase advertising and
00:12:27
marketing have grown in line with
00:12:29
consumer spending and now by themselves
00:12:31
represent as much as 5% of GDP and the
00:12:34
formula has been perfected over the
00:12:36
decades so yeah a pullback in
00:12:38
consumption especially imported
00:12:40
lowquality goods is probably a good idea
00:12:42
as an individual but on a nationwide
00:12:45
level it could get very scary our status
00:12:48
as the biggest consumer Market in the
00:12:49
world gives us a lot of advantages the
00:12:51
reason that America has so many of the
00:12:53
world's largest companies is because if
00:12:55
you can scale a business to address the
00:12:57
entire US market it's already big enough
00:12:59
to be globally dominant and yeah as dumb
00:13:01
as the current trade Wars might seem we
00:13:04
do have a lot of negotiating power
00:13:06
because everybody wants access to our
00:13:07
consumers the American economy has been
00:13:10
growing much faster than most countries
00:13:11
in Europe and even now most countries in
00:13:14
Asia but more of that than ever is just
00:13:16
fueled by consumer spending of
00:13:17
increasingly expensive goods and
00:13:19
services it doesn't help that a lot of
00:13:21
the spending has been fueled by debt in
00:13:23
some variety consumers are also fickle
00:13:25
beings basing so much of our economy on
00:13:28
highly indebted consumption means that
00:13:29
if people get scared all at once about
00:13:31
even the possibility of a recession and
00:13:33
decide to be a little bit more careful
00:13:35
with their money that will cause a
00:13:36
recession eventually debt can only get
00:13:39
us so far and to be reliable consumers
00:13:41
we need reliable incomes unfortunately
00:13:44
the last real problem with this is that
00:13:46
a growing share of this consumption is
00:13:47
being provided by a rapidly shrinking
00:13:49
share of suppliers which is going to
00:13:51
make issues like consumerism almost
00:13:53
impossible to unravel go and watch this
00:13:55
video next to find out just how
00:13:57
concentrated our economy has become and
00:13:59
make sure to like And subscribe to keep
00:14:00
on learning how money works
