by RB Capuz

Created on: April 08, 2010

In theory, Consumerism suggests that increasing the consumption of goods is economically beneficial. But with the economic downturn still wreaking havoc in the United States despite some positive signs of recovery in recent months, consumerism may be seriously affected.

The key to this issue is the consumer’s spending power. How can people think of spending too much when they are grappling with foreclosure or unemployment? Before the recession, most people have the spending power to buy the goods or avail of the services they want, regardless of how luxurious these may be.

During that time, consumer spending was at a high that economists had worried about the country’s low rate of personal savings. Individuals are not afraid to borrow money from banks to purchase a car or a house because their huge paychecks enable them to repay loans and mortgages.

This trend continued for years. Then we’ve all experienced the financial crisis. Then came mass layoffs, foreclosures and bankruptcies.

Due to the weak economy, consumers are hesitant to take on more debt or to spend what little money they have on purchases. This is evident in the consumer borrowing figures in February where it fell by $11.5 billion. This figure is really huge, considering that some economists earlier predicted a meager $500 million gain in consumer borrowing.

Contributing to this decline is the weakness in credit cards and auto loans. Even those who are currently employed are cutting their expenses for fears of future job loss. After all, the unemployment rate is close to 10%.

The resurgence of consumer borrowing and spending may put a strong support for the US economy, which is barely surviving from the worst financial crisis since the Great Depression. But while some experts hope that consumerism will stabilize within the year, the recovery will be hampered by tighter restrictions on credit cards imposed by a number of banks.

Those that are bold enough to borrow money from banks are having a hard time getting a credit as regulators push for higher lending standards among banking institutions.

This is the scenario for some company owners – they could not secure the money to resume their operations. And when less goods are produced, then less goods are consumed.

Will the current economic downturn kill consumerism? No, at least not yet. But as long as the crisis lingers, we should expect a steady decline. Perhaps, only time can tell.

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