I was doing the rounds today on some of the financial blogs and portals (Mish, The Automatic Earth, Prudent Bear). Also, happened to read a bit about the Fed's actions yesterday in the LA Times this AM. There's a lot of talk about the machinations of the big bankers and their friends in the government. Seems these folks in the world of Big Finance are pretty desperate to find some way of getting the good people in American households to restart their consumption bonanza of the last decade.
Note to assistants to Big Finance who troll blogs for their bosses: It isn't going to happen. Not only because households are financially pinched now more then ever before. But, also because of the downside of envy and status seeking, the former is on the rise while the latter is on the wane.
Most people know about status seeking in American households as "keeping up with the Joneses." You know, if your neighbor gets a new car or new paint job on his house, it just makes you and the other neighbors want to keep up with his apparent display of prosperity. This has been the norm in the United States since the end of World War 2.
As price adjusted wages for individuals have stagnated over the past few decades, families and individuals have had to make any number of adjustments just to be able to maintain appearances in the neighborhood. This has meant household adults working more hours (largely through the steady increase of women's financial contribution to households) and taking on greater amounts of indebtedness. The costs to family functioning and family financial well-being seemed worth it, so long as everyone was able to add to their visible displays of stuff & the appearance of leisure.
Now, this sort of status seeking involves a particular sort of psychological orientation. People need to fear falling to the bottom and seek to feel in some sense superior to others. To feel successful relative to the other people around them carries its own sort of emotional reward.
But, in American neighborhoods, it seems that this is the case so long as others have the potential to stay in the game themselves. People don't mind the status game, so long as others in the immediate community are perceived as also fully able to participate. If people in the neighborhood fall behind, people assume that is either because they "don't belong" (e.g., are income restricted) or because they lack certain personal qualities that would otherwise allow them to display greater financial success (e.g., too lazy to care for the lawn).
The keeping-up-with-the-Joneses game works on a cultural and psychological level so long as the assumption that economic opportunity for all in the neighborhood remains. But, when hard times strike, this all changes. When friends and neighbors encounter their fellow Joneses and discover them to have lost their jobs or taken a massive pay cut, status seeking can quickly turn to avoidance of envy.
Envy is a particularly corrosive human emotion (it has been observed in other primates too!). It is built on the idea that the apparent success or well-being of others relative to one's own is ill deserved, a reflection of an unfairness of some sort at work in the community. Envy can drive a powerful desire to see successful others fall from grace. It can spur malicious gossip and various form of witchcraft accusations.
Envy turns the psychological and cultural rewards of overt status seeking negative. Apparent success can bring on feelings of envy from others and this in turn can lead to malicious behavior from others in the community directed toward one's self and one's family. To avoid envy, one begins to gain greater concern for maintaining appearances of austerity, rather than prosperity. People spend less (at least less obviously) and are less likely to share stories of their good fortune (O.K. brag) with their neighbors.
This can promote a sort of positive feedback loop, perceived hardship in the neighborhood, leads to maintaining appearances of austerity (to avoid engendering envy in others). This can further reinforce the appearance of austerity leading to even greater attempts to avoiding appearing materially successful. An so forth.
So, while many Americans can neither work more hours to earn more or take on more debt , keeping them out of the status competition, other, more prosperous Americans who could take on more debt, are less likely to. Why? Mainly to avoid attracting any sort of neighborhood maladies spurned by feelings of envy their neighbors might feel should they discover the ongoing success of some of their number in the face of so much economic stress for themselves.