The flat screen TV phenomenon
Do you remember, back in 2005 or 2006 or even up to early 2008, how absolutely everyone seemed to be buying flat screen TVs? And not only one, they’d actually buy new ones when new models came out, or ones with different high definition properties. And not just people who could afford it, either. The marketers did an excellent job in somehow convincing people that they needed these flat screen TVs so bad that they should just put it on their credit cards, all 3 thousand dollars of it, or whatever those things cost.
I don’t know exactly how much they cost because I never bought one. The last TV we bought was in 1997 and it still works, for the most part, although it’s really hard to turn it on and off. When it finally kicks the bucket I’m thinking we go without a TV, since TV pretty much sucks anyway. When we do watch it, it’s for live sports (local, or nationally televised, since we don’t pay for cable). Baseball we watch or listen to on the computer.
I was reminded of the the “flat screen TV era” by my friend Ian Langmore the other day when we were discussing household debt amnesty. His argument against debt amnesty for consumers was that they might spend it on crappy things. His example was luxury dog poo, but I’ve been obsessed with the flat screen TV phenomenon ever since a friend of mine, who was $120,000 in debt and didn’t have a salary, somehow managed to buy a flat screen TV in 2007. It blew me away in terms of wasteful consumerism. Ian found this unbelievable blog which kind of sums up my concerns.
In Ian’s opinion, the danger of amnesty, or any system where money is put willy-nilly into the hands of consumers, is twofold:
1) We waste time on unproductive activities. E.g. people spent time buying/building cars that are unneeded.
2) If a miscalculation is made, then the over-leveraged money-go-round stops with a huge mis-balance. E.g. home mortgage crisis.
These are very good points, and put together form a lesson we somehow can’t learn, although perhaps that can be partially explained by this article.
I have two thoughts. First, I’m also uncomfortable putting money in the hands of irresponsible consumers. But the truth is, the way I see it is currently working, we are already putting money in the hands of irresponsible bankers (that’s what the term “injection of liquidity” really means), and they are not doing anything with it, so let’s try something else. In other words, an alternative unpleasant idea.
Second, I don’t think we are going to see a new wave of flat screen TV buying any time soon. If we put money into the hands of consumers right now, I think we’d see them pay down their debts, go to the doctor, and buy jeans for their kids. Of course, there is always someone whose pockets burn with cash, and they would waste money in any situation. Let’s face it, though, credit is tight right now compared to the mid-2000’s. In fact, since economists seem to have a tough time spotting bubbles until afterwards, maybe we can take “a huge part of the population starts buying useless gadgets on credit” as almost a definition, or at least a leading indicator. Then at least there would be some point to all of that wasteful spending.