Another question arises: poor and rich have always existed—what makes the current situation different? Why do we speak not just of the poor, but of “smart-buyers”?
If it were up to me, I would call smart-buyers the “new poor.” Though I suspect such a term already exists. The novelty of smart-buyers and their difference from the traditionally poor is that they are not poor in the technical sense of the word. Most likely, a significant portion of smart-buyers own their homes, have at least two cars per family, and so on. Accordingly, they have completely different cultural stereotypes and habits than the “ordinary” poor.
What caused the appearance of these people, or more precisely, what caused the change in their behavior?
I think the reason lies in what we call the “economic crisis.” Generally speaking, the phenomenon of smart-buyers tells us far more about the state of the economy than any macroeconomic analysis could—namely, that it is getting poorer.
Since the 1970s, the main trend in the Western economy has been increasingly active attempts to treat economic problems by printing money. Of course, there were retreats and attempts to “quit,” but the general direction remained. The West has since gone through several crises and arrived at the current one. It is quite possible that this crisis, too, will be survived without changing the main direction, but changes will inevitably come sooner or later—and smart-buying is simply one of the signals along this path.
So what is the problem? The infusion of new money changes the incentives for producers. Since people have “extra” money, they are prepared to spend it on what they could not previously afford. And here is what happens: the “invisible hand” punishes bad producers in favor of good ones when the money supply is not growing by leaps and bounds. Well, if it is growing, why make good things if people buy bad ones?
All this time, the psychology of producers and traders has been changing. They have increasingly ceased to compete on quality and low prices. I have my suspicions that marketing in the form we know it became so popular and turned into a whole science precisely during these years. If you become acquainted with this doctrine, you will see that it is “by default” based on the idea that people have money and the main task is to somehow coax it out of them.
However, new money does not create new wealth. It creates an illusion of it. The existing state of public wealth (in the broadest sense of the word) is capable of supporting only a certain number of businesses and other projects. The illusion of wealth makes people do what they would not do, had they known the real state of affairs. Moreover, the constant emission of paper money distorts the structure of relative prices—precisely what forms the basis of exchange and normal development. After all, let us not forget that in the final analysis, real goods participate in exchange, and money expresses their exchange ratios. When the money supply is constantly growing, we simply cease to understand what is actually happening.
What is happening in reality is shown precisely by such phenomena as smart-buyers—people who are formally not so poor, but who, nevertheless, cannot afford to thoughtlessly buy such goods at such prices.
It is possible that smart-buyers are a sign of a kind of turning point. We live in an amazing time of zero interest rates—that is, in fact, unlimited production of new money. And it seems that they are ceasing to work. The old incentives no longer act; the real state of public wealth and the structure of relative prices make themselves known. The economy is much poorer than it seems to us, and possibly it continues to grow poorer.
Producers and sellers still live in the old paradigm of cheap money. Buyers, however, already fully feel the real state of the price structure. But that is how it must be. Buyers should be the first to notice changes, and only from them can producers learn that they are acting incorrectly. Smart-buyers signal to us that the “invisible hand” of the market, despite all attempts to deceive it with a rain of money, is returning again. And this means that to survive, producers will again have to make quality things. Agree that this is good.