Next month, we will observe the 100th anniversary of the Titanic’s tragic sinking into the icy depths of the North Atlantic Ocean. To mark this significant event, the April edition of National Geographic features an in-depth cover story about the ill-fated ocean liner and its premature demise.
At Economic Prism, we are always eager to uncover allegories that shed light on our current circumstances—especially during this post-2008 era defined by the dollar-driven consumer capitalism in the U.S. The Titanic’s story serves as an abundant source of metaphors. National Geographic poignantly notes:
“Beyond the tragic loss of human life, the Titanic took down with it an illusion of order, a belief in technological advancement, and a hopeful outlook for the future, which, as Europe spiraled toward war, was soon engulfed by familiar fears and anxieties that resonate with today’s world.”
“The Titanic disaster was the bursting of a bubble,” remarked renowned filmmaker James Cameron. “There was such a sense of abundance in the early 20th century. Elevators! Automobiles! Airplanes! Wireless radio! Everything seemed magical, on a never-ending journey of progress. Then, it all came crashing down.”
Indeed, for those who reflect deeply, the story of the Titanic offers invaluable lessons. However, before we explore these, let’s examine our current economic landscape.
The Rising Tide of Oil Prices
Recently, we filled our tank at $4.37 per gallon for low-octane fuel. Does that strike you as excessive? It certainly does for us—and many others as well.
According to the University of Michigan’s consumer sentiment index, released last Friday, consumer confidence in the U.S. declined in March for the first time in seven months, largely due to the sharp rise in gas prices. Following this sentiment report, stock markets took a downturn; for the first time in a week, the DOW index did not rise but fell instead.
The discomfort caused by high gas prices is palpable. The AAA Fuel Gauge Report indicates an astonishing 18 percent increase since December, pushing the national average for a gallon of regular gas to $3.83. Comparatively, gas prices in California have reached $4.35, $4.24 in Alaska, and $4.48 in Hawaii.
In conjunction with this, the Labor Department reported a 0.4 percent rise in the consumer price index last Friday—the largest increase in consumer prices in ten months, resulting in an annualized inflation rate of 4.8 percent. The primary driver of this inflation surge was gas prices, which accounted for over 80 percent of the increase. Some may argue that rising gas prices represent another heavy blow to households.
While people relish the experience of seeing their 401K index funds rise and their home values increase, no one relishes the thought of ever-higher gas prices. Rising fuel costs function as a hidden tax on the economy, draining resources from other consumer goods and services. When gas prices escalate unnecessarily, they can ultimately lead to an economic downturn, suppressing demand and driving gas prices back down.
Remember July 2008? Just before the global financial crisis ensued, oil prices peaked at an astounding $145 per barrel. By year’s end, they plummeted to $30 per barrel. Now, oil prices have ascended again, hovering around $107 per barrel, reminiscent of a yo-yo.
The Myths of the Titanic and the Decline of Consumer Capitalism
The ongoing fluctuations in oil prices illustrate the chaotic forces at play within our economy. Yet, this cycle continues, bolstered by the Federal Reserve’s efforts to uphold the narrative of U.S. consumer capitalism—that relentless economic growth fueled by ever-increasing debt is sustainable. Let’s unpack this further.
Like many governments, the U.S. has been grappling with chronic budget deficits for nearly half a century. By consistently spending beyond its means, the national debt has ballooned to over $15.5 trillion. If we consider unfunded obligations related to Social Security, Medicare, and prescription drug coverage, this figure skyrockets to more than $118 trillion.
Since the early 1980s, American consumers have mirrored their government’s spending habits, capitalizing on the seemingly endless supply of low-interest credit provided by the Federal Reserve. Economists praised this consumer-driven growth as a key component of GDP expansion. Yet, few considered the consequences—consumers were effectively spending themselves into financial oblivion.
Why save when you can spend? Why stash away resources for the future when the present feels secure? Why accumulate wealth if you can simply indulge in immediate gratification? “Myths and legends die hard in America,” noted Hunter S. Thompson.
Unfortunately, all good things must come to an end. In the wake of the 2008 financial crisis, government debt surged while economic growth faltered. This divergence between debt and genuine economic expansion is unsustainable and cannot be mended. In essence, a trend that could never last indefinitely has reached its conclusion.
Like the Titanic after its fateful encounter with an iceberg, the dollar-centric era of U.S. consumer capitalism is facing its inevitable demise. The notion that an economy can indefinitely thrive on borrowed and spent resources is slowly meeting its grim reality. Sooner or later, the structure will snap, and the entire system will plunge to the depths, much like the Titanic.
In conclusion, understanding the parallels between the Titanic’s saga and our current economic climate highlights the precarious state of modern consumer capitalism. While the hope for unending prosperity persists, a reckoning looms on the horizon. As we navigate these turbulent waters, it’s essential to acknowledge the lessons from history to better prepare for the future.
Sincerely,
MN Gordon
for Economic Prism
Return from Titanic Myths and the End of Consumer Capitalism to Economic Prism
