10 ways the new economy will look different
From the rise of the tightwad to the decline of the Sun Belt, American values and industries will be reinvented as the nation comes out of the worst recession since the 1930s.
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3 EBAY AMERICASkip to next paragraph
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One quality that almost by definition reflects value is the state of being second-hand. And in the economy to come, the sale of used goods may increase as secondary markets surge in importance. This means Goodwill and Value Village will become more and more peoples' idea of places to shop for vintage fashion. People who previously preferred new cars now might buy used.
At Twice as Nice, a consignment shop in downtown Tuscaloosa, Ala., Leslie Stallings stares up at wedding dresses hanging from the ceiling. She and her mother, Debbie Stallings, drove nearly an hour in torrential rain to find the perfect dress at a reasonable price. The dress she really likes, the one she can imagine shimmering in the candlelight as she says her vows, is $1,200 at a local bridal boutique. This one is only $300. Still, they decide to keep looking.
One reason eBay and similar outlets will take on greater importance in the future is the nervousness of consumers. About one-third of US residents feel at immediate risk of downward mobility. One-third know someone else who is threatened. One-third is fairly secure but understand conspicuous consumption at the moment seems like bad manners.
Another will be the shrinkage of the full-price marketplace. Underhill figures that the US has more stores than it will need in the future. During the Great Depression, a pants pocket turned inside-out to show it was empty was called a "Hoover flag," after President Herbert Hoover. Today's Hoover flag might be a "For Lease" sign in a strip mall. "We are going to see a 20 to 30 percent [retail] vacancy rate," predicts Underhill.
4 MONEY IN THE MATTRESSES
Right now, wallets are shut tight all across America. But consumers will begin spending again – probably fairly soon. That doesn't mean they'll be spending as much as they used to. In part, that's because they have less money than they did. The fourth quarter of last year alone saw a record 9 percent decline in US household wealth, according to the Federal Reserve.
Borrowing has propelled consumer spending in recent years, but that will be constrained, too. Lower house prices mean fewer lines of home equity. Banks, with their profitability in question, are lowering credit-card limits. Menzie Chinn, an economist at the University of Wisconsin, thinks consumers won't spend freely again for five years.
"Basically, it'll take a long time for households to rebuild their balance sheets, i.e., wealth, in the form of housing and equities," says Mr. Chinn.
The problem is, this nonspending trend has gotten out of hand. Sales of cars, appliances, and other durable goods have fallen below the rate at which they are typically replaced. Over the past year or so, the US savings rate has gone from essentially zero to 5 percent. That's a lot of money going into the mattress. Christine Romer, chair of President Obama's Council of Economic Advisors, thinks consumer spending will soon rise.