I guess for whatever reason I have never felt compelled to conform in the sense of buying lots of crap to prove I was a success. Yet I live in an area with SUVs and McMansions all over the place, and we know some of the people who go in for all of this stuff.

Some of it seems to be cultural - some ethnic groups seem to place much more importance upon appearing successful than do others. Ultimately it will place a great strain upon the people who attempt to maintain appearances - those who downsize and simplify as required will undoubtedly have a much easier time of it.

I keep thinking back to when I was a kid - we didn't have lots of expensive toys, but we could play chess, board games, card games, or go outside and ride a bike or throw a football around. We had houses that all had a single bathroom, and our families had only one car. When we kids wanted to go somewhere, we would ride our bikes or take the bus - rarely would we get a ride in the car. When we took a vacation, we tended to throw tents and sleeping bags in the car and go camping at State Parks that weren't too far away - we didn't fly off to exotic places very often (if at all). If you had asked us, we would have said we were quite happy - many people today would find living like that to be difficult.

My apologies if this was previously posted, but it seems very appropriate for this thread (another priceless thread from TOD).

Speaking of our Monkey Trap Culture:

Hanging On, or How to Get Through a Depression and Enjoy Life

... I’ve seen few interesting, in-depth accounts of how middle class, and upper middle class Americans in particular, experienced the 1930s depression...

...If you were in a business, you kept the business going any way you could until the upturn came and things got better. If you had a job, you hung onto it any way you could...

http://www.oftwominds.com/journal09/MB-depression3-09.html

I found this article over at Bill Totten's weblog:

http://billtotten.blogspot.com/2009/03/global-collapse.html

I think it captures the essence of our current financial predicament very clearly and concisely, and the only thing I found at all lacking was any discussion of what the viable alternatives might be, if any.

I had several "aha!" moments while reading it, and now I find myself wanting to look up William Catton's book "Overshoot" because, if memory serves, he had similar things to say about the root causes of the last great depression.

Cheers,
Jerry

You bring up some interesting points.

Re: #4, I grew up in the Boston suburbs in the 1980's. It was not always easy to tell the rich from the poor. The rich drove beaters, the poor drove beaters with nice stereos. The rich dressed in LL Bean, the poor wore Nike. The main difference was in what schools their kids went to. When I came to the Midwest, it seemed like everyone was rich, with nice cars and such - I think it was just that people wanted to project that image, where in the East, people wanted to project thrift.

#2 I am not so sure about. It seems that many of today's poor, especially urban poor, have few skills and no land, and also many have drug and health problems. I don't think that people who are used to going to the 7-11 for food are going to fare well, other than by government handouts. There are still some rural poor who have lots of practical skills and will probably do fine.

Re: #1. I am very interested in the story of how you made the decision to make the "switch" from Wall St. hotshot to Ecological Economics (Master of the Universe to Master of a finite planet). Did you get a lot of ridicule from your BSD Wall St. buddies?

Present value

In calculating the present value B of a perpetual with face value A, paying interest at a percent per annum, we have to discount the annual interest payments at the prevailing rate of interest b. Since the annual interest payment is Aa, the discounted value of the nth interest payment is Aarn, where r = 1 - b is the discount factor. We have 0 < r < 1, hence rn approaches zero as n gets arbitrarily large. The discounted value of the string of interest payments is:

B =Aa(1+r+r2+r3=...+rn=...)= Aa/1-r=Aa/1-(1-b)=Aa/b

We conclude that Aa = Bb. For example, the 4% perpetual with face value $1000, yielding $40 per annum, can be traded in the secondary market for $1000 as long as the market rate of interest b is 4%. However, if it is halved to 2%, the same perpetual can be sold for $2000, because at the lower rate it would take two debentures to generate the same income stream.

February 12, 2009

Growth And Debt: Is There A Trade-Off?
by Antal E. Fekete

http://www.safehaven.com/article-12584.htm

An interesting PoV from Jay FitzGerald, at http://sanityandsimplicity.blogspot.com/2009/02/how-i-measure-my-co2-foo...

So, what is my allowable consumption to be carbon neutral? Well, roughly 200 gallons of gasoline a year, or 4000 lbs of wood in the woodstove, or elsewise in consumption in the mix. Of course here it gets very complicated, and it gets tempting to cook the books. Personally, I think the easiest thing to do is to scale it all in gross dollar consumption because the spending of every dollar has a carbon impact at this point, and the price of a gallon of gasoline is probably the most accurate measure of the real impact of a purchase, as fuel is one ingredient in everything we buy. If I assume 200 gallons of gasoline at 3 dollars a gallon as an average(since I don't burn that much gasoline) we have 600 dollars of consumption: if we assume that fuel is at least 10% of the cost of any purchase, conservative indeed--this gives me a consumption level of +/- 6000 dollars a year at current valuations as what I'd see as the upper allowable limit of personal expenditures. Of course this is a little over twice of global GDP so I'm living pretty high on the hog. A good number for a lot of reasons: 3 acres per person, perpetual permaculture, living under one's federal standard deduction so tax money doesn't directly go to undermine one's effort(another topic). At the moment with world population where it is there is almost 5 acres per person on the planet so the effort is sensibly ethically dependable. . .3 acres per person in agriforestry permaculture with cash expenditures not to exceed 6000 dollars a person for annual expenses to me seems to be a very good estimate of what sustainable really means. It is indeed do able, and of course, central to the theme around here, is a strategy that makes the forthcoming economic collapse of pretty small consequence. . .

Okay Nate

I can't this one up. Money by and large in this culture equals status. We are primates used to living in strict social hierarchies. We're quite vicious primates and really by and large thrive on deferred aggression towards those lower down in the social hierarchy. Poor = low status. Lower status in the mainstream culture = (1) the being of the target of much more intraspecific violence (2) poor access to health care (3) no access to education. People are on the treadmill of "keeping up with the Jones" because status means a great deal to us in terms of access to these basic issues. Although very few people think this thru consciously (except for social scientists and people who have made major changes in their hierarchical status), I suspect that most people are quite aware of this calculus on a subconscious level.
You've said that you've breathed the air on the top. I'm a ghetto kid who's breathed the air on the bottom. Job opportunities where I grew up were the military, drug-running and prostitution. I was the only scholarship kid. Through education, I've gone from the ghetto to an upper-middle class life. What that means: I can do work that I love (paleoclimatology). I can go to the doctor when I'm sick and be diagnosed. I'm not immediately written off as a drug-user or a psych case. I am much physically safer. I'm not usually a chosen target of the police now (I'm light-skinned, don't speak with a Native accent, and I make eye contact with whites, I dress professionally in button-down shirts).
There's often alot of cracks about wives caring about status too much on the Oil Drum. I suspect that women are as conscious about how dangerous it is to be perceived as poor as non-white males tend to be. They (correctly) perceive middle-class status as much physically safer and conductive to a healthier existence with more opportunities.
I'm trained as an ecologist, and I know that our dream North American middle class lifestyle is completely unsustainable. And yes, most of these desired status items are crap and don't make us happy at all. But if you want people to voluntarily become poorer you've got to address these human rights issues. From what you mention of your thesis research, you are viewing us as individuals. We're not, we're primates in a hierarchy where status matters deeply for serious matters. Check out the vast literature of social determinates of health http://en.wikipedia.org/wiki/Social_determinants_of_health, the research of Dennis Raphael and there's alot of good work by British statisticians on the subject.

Great post, and quite true.

One offshoot of the choices listed could be to adjust ones values and live on $30k while making $300k, and save the rest.

My wife and I have managed to live on under 15k per year (that's for both of us, $7500 each) - sometimes substantially under - for our entire adult lives, and that includes the costs of all possessions and building housing, food, medicine, etc. in what is one of the more expensive states to live in.

During a significant part of that time we were each making relatively decent salaries so our income was well into the 6 figures range, but we simply treated that as "spare" money to spend on global conservation work. Now that health limitations have knocked our income down, we still don't experience hardship since the only thing missing is the "spare" money.

And I'm not talking about self-deprivation. With a little creativity it has been possible to not only feel like we were living adequately, but to give the outward appearance of being slightly eccentric wealthy people. Many who know us probably think our income is more than 10x what it actually is, since we don't "act poor" with the usual social signals.

I'd recommend that sort of lifestyle to anyone; it has probably been more satisfying than the lives of the billionaires I've known; I certainly wouldn't have traded lives or priorities with any of them. Feeling like a success in one's own eyes and by one's own standards, feeling like you didn't waste your life on unimportant crap, is real wealth.

and to answer the question, I wouldn't want Trump as a next-door neighbor, since he's a bit of a dick and would probably complain about my landscaping. MacGyver would be welcome. Or maybe compromise on the guy who played him, he helped me save some Taiwanese monkeys once. (Unfortunately, some monkey traps actually still catch monkeys).

Do big stuff for the world, die broke.

We're much alike, Nate.

"Before the repeal of the small farm act in the early 1970s, poor people were incredibly healthy, as they would use what little land they had access to and grow their own fresh produce."

I'm getting old. This sounds like "in the 40's"
used to sound to me.

"I picked cotton by hand" sounds like "and then we
had electricity." ;}

I've always lived pretty close to the ground and never felt especially deprived, although I have often been resentful of rich people for all the resources they squander on nonsense stuff. But there remains a very big difference between me and the "poor." Attitude, upbringing, education, and other things I don't know about.

Most people, rich or poor, don't voluntarily give up stuff they already have. I don't think Nate is really any different. He may have given up money and a lot of nonsense stuff that went with it but got something better in trade, more satisfying. Well and good. Can anyone do that? Well, yes, hypothetically but in reality most people won't see it that way.

"Given the near certainty of cultural shift away from conspicuous consumption due to unaffordability via asset deflation and eventual inflation, the disparity between the haves and have-nots will increase. The "American dream" may not seem to be available to everyone anymore,..."

It may be harder to prise "the dream" from the grip of even the most hardened of poor given the proliferation of the active screen based media such as Television, internet and billboards, blaring messages at the masses all day. Then there are the lotteries, which promise huge instant wealth as a carrot to keep on toiling and "practicing" overconsumption to prepare you for the day when your numbers come up. Orwells 1984 is much more real and pervasive than we think.

Even the coming depression may not be enough to reset peoples expectations or ambitions. The chasm between desire and fulfilment of course will become wider. The mourning will be long and desperate, prolonged by mass media and their corporate big brother masters, just as desperate to survive.

Eventaully of course, reality will smack people in the face and some of them will wake up. The path to sustainable austerity will be difficult at that stage, as the dying carcass of the empire will throw up many nasty surprises and navigating them may be difficult even for the well prepared. It is the time of transition which will be the most dangerous and I suspect we are just in the opening scenes of the first act. Good luck.

Nate,

I remember a poll done on TOD perhaps a couple years ago where it asked about the religious persuasion (if any) of the TOD community. I believe that the "believer" segments (of whichever persuasions) were in the minority. Nonetheless --wherever you are situated on the "belief" map-- what you describe as your embracing of a significantly lower (not impoverished) lifestyle reminds me a lot of "Brother Sun, Sister Moon," that maudlin-but-magnificent movie in the '70s of Francis of Assisi. I'll never forget the scene where he realized (as you appear to also) the hollowness of his father's wealth and stripped down naked in the town square, throwing off his rich garments to embrace poverty and the simple life.

Your story has a similar ring to it, and I find that inspiring.

"The jump to a lower consumption lifestyle is a long one. I might also note that few of their wives would willingly sign up."

This point is huge! the underlying reason most men strive for the outward trappings of success is to have access to attractive women.
In my own personal preparations for imminent PO, I thought it
wise(!)to sell my $16,000 Harley and use the proceeds to buy a woodstove and other improvements for our home. Even though I had carefully explained my reasoning to my wife, her reaction was immediate. "But it's a status symbol!" she wailed in dismay.... SHE DID NOT EVEN LIKE TO GO FOR RIDES ON IT! But she adores the Harley apparel that they sell at the dealerships. I fear that this primitive
yearning for baubles and status symbols will make the descent far harder than it needs to be, and will be the root cause of many failed marriages...

Matt

When I saw the title what I first thought of was debt. Those on $300,000 will often have a larger debt as a multiple of their income than those on $30,000.

That debt naturally drives them to want more income to pay it off. So there's something else to consider with the always-just-out-of-reach graph. Someone on $10,000 wants another couple of thousand for a few luxuries; someone on $100,000 wants another ten thousand or so to sort out the huge debts...

I once had a chance to interview an American musician who was, at the time, on tour with another musician from Canada. She related how the Canadian artists had a "leg up" on their American counterparts. First, every Canadian is covered by health insurance. This liberates people to follow their passions rather than seek & stick with a job they hate just for the benefits. Second, the Canadian government had a small competitive grant program to underwrite the cost of touring (van rental, gasoline). The Canadian bands were by no means financially rich, but as Nate suggests, they were wealthy in human capital (health) and social capital (there is a surprisingly vibrant music scene in Canada, more than one might expect from a nation its size).

When I think of doing more of what I want, following my own passions, I know that health insurance (and the potential to not have it) is a major impediment.

I was the up and comer in the company I worked for all those years ago. I was somewhat below a VP level but I was high enough to see and participate in the inner workings - which was, "People are expendable - the company comes first."

At the time the WSJ (which I subscribed to) had a series of articles about corporate dropouts. and I began to ask myself why I was doing what I was doing. What was more important, climbing and making lots of money or having time to live life. Time was an issue then since I had many 18+hour days (mostly starting up new facilities and devising productivity plans at other plants).

After a few years, I came to realize corporate life was wrong for me and my wife and I started to look for land. To make a very, very long story short, we ended up in Mendocino County in northern CA on 13 1/2 acres which was a huge change since we were lining in Dover, DE at the time we bought the land in 1972.

One very influential book for me was Robert Houriet's Getting Back Together (1971). It showed me that alternatives were possible. So, I've lived without status for 35 years. Oh, I served on a lot of boards, chaired a lot of committees and was the foreman of our county grand jury one year during this period because I thought my input might help. But, for the last 15+ plus years, I've walked away from even these minor status things.

One has to deliberately chose ones life and what is meaningful. For me, it was time to live.

Todd

I find this topic to be quite a dilemma – why is it that most of our fellow US citizens persist in clinging to the deep and abiding faith that cars, houses, gadgets, trips, etc. are the basis for happiness when only the most delusional fool cannot see the collapse of this value system unfolding in the media on a daily basis?

I’m a bicycle advocate – I believe that the bicycle is the most brilliant machine conceived by mankind. Not only does it provide fantastic mobility (100 miles in a day is easy for a physically fit person) but, more importantly, it has the ability to reverse the brutish isolation of car travel and bring back a level of personal interaction with fellow travelers that most of us left behind in our childhood. A simple test – bicycle through a foreign land versus taking a bus tour – report back your level of interaction with people and your degree of happiness with the trip.

I live in a nice area: “Ozaukee County ….. population 86,697… second-lowest poverty rate of any county in the United States, at 2.6%. In terms of per capita income, Ozaukee County is the 20th richest county in the US…. Located on 25 miles of the western shores of Lake Michigan…. “

Ozaukee County has an exceptionally nice bike trail and cycling for recreation on the trail is accepted – however, county supervisors will not allow one penny of county taxes to be used for the trail or any type of utilitarian cycling. Utility cycling here is a matter of personal bravery. Only a tiny minority bikes to work or the supermarket, few kids bike to school. Many motorist view cyclists as nothing more than an inconvenience for their daily driving – some hate cyclists.

If something like utility cycling, that has such an obvious potential for energy conservation, health benefits and social interaction, is shunned and rejected by the majority of the citizens, how can we expect any type of downshifting from our contemporary consumption oriented culture?

My belief is that the great majority of our citizens simply do not believe there is a problem that cannot be resolved within the framework of conventional thinking. Until that changes, it is doubtful that any kind of rational change of culture will occur.

The poor were "incredibly healthy" before the 1970s? Maybe they had less of certain diseases, but poverty has always been bad for one's health. This became even more important after medical science matured enough to actually help a lot of people -- basically, in the 1940s. The diets of the poor tend to be inadequate, despite the availability of land. For example, there was an epidemic of pellagra, a nutritional deficiency, in the rural South in the early 20th century. It primarily hit the poor. On top of all that, the low status and lack of control that come with poverty appear to negatively affect health. I'm all for mindfully curbing consumption, but let's not glamorize poverty.

Like any good American I have never heard of this "small farm act" that was repealed, and the good God-fearing US media such as Google etc have nothing on it. Anyone got the secret inside scoop? I'm all ears.

Hello Nate,

Most excellent keypost [Kudos!] with great TODer comments. It would be fascinating to medically study and MRI brain scan Simmons, Pickens, and Rainwater when they are on their farms vs when they cooped up in their corporate offices--I bet the differences in blood pressure and other medical indicators would be quite striking.

Perhaps the US would be better off as we go postPeak if we invited the British to burn down the White House again as it is an absolute 'pressure cooker'. If 0bama was forced to relocate to the spacious greenery of Camp David--his mind might dramatically readjust more towards Socrates' desired 'philosopher-king'-->he might rule more wisely.

From memory, I seem to recall reading that previous Presidents were happiest when they left Washington to visit their homesteads: FDR at Hyde Park, JFK to Hyannis Port, Nixon at San Clemente, Carter at his Georgia peanut farm, Reagan at Rancho Del Cielo, LBJ and Bush in TX, etc.

Also, consider that Socrates, Plato, Aristotle, surely some of the clearest thinkers EVER, did much of their thinking and discussing outside or in atriums. Again, consider Lincoln thinking while resting between log-splitting in the wilderness, or Jefferson pondering and writing away at his beloved Monticello.

Modern day: Nate's clarity might have a lot to do with the time he spends in his garden patch and walking his dog, with the same effect of Nature juicing Jay's awesome intellect.

Maybe 0bama would be at his best if he spent a lot more time in the sea-breezes of Hawaii again. There is something undeniable from taking the time to smell a rose, see a sunset, chase a butterfly...

1. I have seen and lived true poverty (not enough money for food - which is how I define true poverty) and you would be surprised how, besides he media hype, people (even spouses and kids) can adjust and stick together at any sort of income until it gets down to the breadline. Beyond the breadline, it becomes every family and ultimately man for himself. Famine is luckily relativly rare.

2. There is little discretionary oil consumption anywhere apart from oil spent on vacations. A common misconception is that those on lower incomes somehow choose to consume less oil than the rich and that the poor will be the first to consume less oil when prices rise. There is a correlation between earnings and oil consumption, but this tops out at relatively low level (under $20,000/year).

3. Why is consumption so bad? Consumption is not waste. Consumption is a good thing that provides gainful employment to others. I believe that your concern is that we will comsume oil wastefully. Oil is going to disappear and we should not waste it needlessly. However, no matter what we do, oil will soon all be gone. The real question shuold be: is consuming it all now rather than in 50 years time wrong, or simply forcing our children to face the exact same dilemma?

4. Although it is commonly cited, the American dream is not about consumption. It is about living in a country where freedom of expression is a right. Conspicuous consumption has been around since the first caveman ever brought home a nice fur coat from the hunt. We should not perpetuate the idea that the American dream is all about consumption as that has never been true.

So, it is easier for a rope to go through the eye of a needle than for a rich man to enter the kingdom?

Excellent post.

Your chart just out of reach reminds me of the definition of happiness...."happiness is the difference between what you have and what you want". I believe this saying has a lot of truth in it, no matter what your wealth if you are satisfied you will be happy and if you are rich and want more you will not be.

One thing I have tried to drill into my kids is that wealth is not earnings, it is the difference between what you make and what you spend. There are a lot of people with big earnings who spend it all, and more. Meanwhile a lower-middle class person who lives modestly likely has greater savings than the spender who makes more.

With respect to conformity I have an observation from my city. I often meet lawyers and auditors in my job and when I ask them where they live about 90% of them live in the same area of town. They all believe that to be "in the club" they need to live there. I never had a desire to live there, it strikes me as fake, and full of people trying to "keep up with the Jones's", and keep up appearances.

One of the great "fears" that keeps me (and I suspect others) from taking my hand off the banana and out of the jar is the need to maintain my connection to the good health care that comes with the banana. I don't have a problem with reduced life style because, even though I have a good income, I've never tried to live beyond it. House is paid for, cars are paid for, we have all the "things" we want and our one "expensive" vice - travel - can be done cheaply if you have the time. But health care - what happens if one of us gets sick? Without medical insurance, you won't get the best care, you may not even get good care. And you can't afford medical insurance without keeping that job and that income flowing. I would be very interested to hear how those making the change and dropping the money habit address that issue.

Interesting and thoughtful post, Nate. I would like to point out, however, that it focuses primarily on psychological issues. There are also structural reasons for overconsumption, detailed beautifully in Juliet Schorr's prior book, the Overworked American. There she discusses how difficult it is to work, earn, and consume less, when what is produced is continually larger and more complex.

One example is homes - small starter homes like our parents purchased are no longer built. Even if you want a smaller house, they're often hard to find. We had that problem when we moved to our current city. All the smaller homes were 60 years old. And the neighborhoods that had these homes had got themselves designated "historic" so the cost was MORE than for larger homes built later. (We ended up with a 1976 2000sq ft home.)

Another structural problem Schorr discusses is health insurance. Even if people are willing to trade more time off for less pay (and many people would do this), they usually cannot b/c most employers require full-time work for health insurance coverage. I believe this is a major reason business has resisted a single-payer type health insurance system - to ensure attachment to the job.

My point is, I think (and there is some research to back it up - just can't recall just at the moment where to find it) that many people would prefer simpler lives. But the way our economy is (deliberately) structured prevents them doing so. At least to the extent they would prefer.

lilith

Problem with this analysis is that most people do not experience gaps between their $30K and someone else's $300K.... or conciously forsake $300 K for $30K. That's so large that it's like the son of a wealthy lord going into the priesthood... he's still the son of lord, a member of his class.... just taking a vow of poverty... and perhaps only until he changes his mind. His options are vast. He knows people who can rescue him from his chosen poverty. He carries enormous social capital. He's poor, but he can snap his fingers and with some work reconnect with his origins.

Another shlub may be in the same priesthood because he never had another choice.... same income, but a much more oppressive reality.

The problem with $30K / annum isn't that it doesn't measure up to $300K... but that it doesn't measure up to $50K.

A huge part of the additional value of $300K really comes in the first $20k... after that its marginal contribution to happiness declines rapidly.

Most inequality is experienced not in comparisons of my paltry $30K to my old pals and their $300 K incomes... but at the level of a remodeled bathroom like the neighbors did... or not... a vacation this year... or not... two pairs of shoes for each kid... or just one... a few thousands, hundreds or tens of dollars difference between what I and those around me are able to afford.

Nate is learning lessons about inequality from a truly unusual circumstance... but inequality is experienced quite differently for most members of the middle class. He's gone from a financial elite to an academic elite... but he's still a member of an elite, who, if he'll forgive me for saying so, is slumming it and telling folks it's not so bad.

I would like to believe that... I really would... but like the Communists of old, those who have consciousness often did not come from the working class, and so there emerged a "vanguard" of theoreticians and men of action who acted on behalf of the working class... thinking the thoughts they ought to be thinking if they had the ability to do so, and acting in the ways that were necessary to support their interests, if they only understood it.

I'm not saying there is an easy way out of this problem. I've got a useless PhD myself, and does that mean anything I say really doesn't count because I'm essentially a member of the elite? Maybe.

Yes, happiness is being situated in one's social context... but somehow lots of people think that money and power are happiness too. How to harness that energy without allowing tyranny and exploitation to grow is a long standing human societal and political challenge. Sometimes you can't convince certain people that $50 K is just as good as $300K... you have to tax them, stop them or control them... and you may tell yourself it's because you know riches won't make them any happier, but the real reason you do it is because their vision of happiness makes it more difficult to realize the community version of happiness.

http://www.nber.org/reporter/spring03/health.html

http://epirev.oxfordjournals.org/cgi/content/full/26/1/78

As a society, we are becoming more poor by the moment. Over the years, we have been unable to sustain our wealth flow from the oil in our ground, so we turned to other countries, to supply our wealth. Massive amounts of oil were rerouted into countries like China who then converted the oil into goods, which were then sent to us, in return for borrowed money. They then sent this money back to the U.S. in through CDOs and various Wall street financing schemes, which increased the values of our housing and provided more collateral for more borrowed money to buy foreign goods. If you look at our trade deficit figures, you will see that this indirect flow of oil (in the form of goods imported), has drastically declined and the financial crisis has accelerated. We are all destined to a lowered standard of living regardless of our present day situation. Peak oil is hitting like a sledge hammer.

Nate,
thanks a lot for this excellent posting and for your "coming out" about your personal change of lifestyle.

With your past, among others as a former Vice President at Lehman Brothers, you certainly know quite well the people you are talking about.>

However I think that your conclusion that it will be easier for all "poor people" to cope with the coming crisis is too simplistic: There is not only a homogeneous mass of "the poor". Instead, as far as I know, modern sociology now discerns a more complex pattern, which is called milieus. At least in Germany, these are well known and used as SINUS-Milieus or Sigma-Milieus.

For example the milieus in GB look like this:

As you see these milieus are determined by two parameters:
Social Status and Basic Values.
As far as I understand the social status mainly determined by the person's education and professional career (which may change with time), whereas the basic values are determined by the personal mindset, which may be influenced for example by one's moral education, family environment or - perhaps to a large extent - be an innate personal character.

This scheme is being widely used for example in marketing or in politics. (It can be worthwile to keep this in mind sometimes, for example this explains quite well why political parties grow or shrink as the social milieu they are focusing on is growing or shrinking.)

Now in comparision to your categorization between "rich" and "poor" there is this second "mindset" dimenson, which makes the overall prediction more complex:

For example the change of lifestyle you described might roughly fit in the milieu of post-materialists (roughly: people who are well off but know that there are more important things than money). People like you are (or were) rich and can cope quite well with a lower material lifestyle. However there are other milieus of rich people (which you described in your text) who still strive for more money.
On the other hand there are also poor people who can cope well with little money (e. g. hippie-like lifestyle, not displayed in this graph) but there are also poor people very eager to climb up the ladder (not discerned in this graph).

Apart from this sociologists have determined quite distinct milieu maps for several countries, so one cannot simply transfer the milieus of the US to the UK, Germany or China.

So the personal economical history may be one thing that determines the ability to cope with the coming crisis, but the personal mindset, which probably is even harder to change, is another one.

One important thing about addiction is how it can be maintained. Can you keep the addiction going can you feed it at a minimal level ?

Obviously one of the biggest things Americans are addicted to is cheap credit and buying large houses with cheap credit.

http://www.calculatedriskblog.com/2009/03/rising-epd-on-fha-loans.html

CR has a fantastic post on something I've been almost preaching that cheap loans will not prevent foreclosures.
Cheap credit can't cure our addiction to cheap credit. All the actions of the US government is doing is ensuring a steady stream of foreclosures coming on the market for years to come. Given that these FHA loans with 3% down many with fraudulent down payments make up a significant fraction of the new home loans. In some areas I've seen over 50% of the loans are these government backed subprime loans.

http://www.mainstreet.com/article/moneyinvesting/credit/debt/mainstreet-...

Its important to understand that as housing prices fall the only way to lower default rates is to ensure that asset backed loans are fully secured with home prices falling this means you have no choice but to reduce the loan amount to a fraction of the asset value and that this fraction is derived to include falling values for several years.

All of the risk has to be offloaded onto the borrower so that banks can repair their balance sheets and put this credit bubble behind them. Or we nationalize our banking system completely and give up on our farce of a free market.
That route leads to massive inefficiencies and eventually to a soviet style collapse. And it still does nothing to stop sliding home values. I'm pretty sure Britain will take the second path and eventually the US.

Now this is home specific but you can see that its really the game that Nate is speaking of everyone seems to not be happy with what they have thus they use leverage in the form of ever more unsecured debt to buy more than they should.
This imprudent purchasing by unqualified buyers drives up prices resulting in people getting less for their money.

So you have this sort of relentless train going. People leverage their incomes grasping for more as more people leverage more prices increase because "demand" is higher resulting in a spiral of rising prices and rising debt for many assets.

The second problem is the pool of prudent borrowers i.e the Nate Hagens of the world steadily shrinks fewer and fewer people resist the debt spiral as everyone is doing it. It goes past just keeping up with the Joneses and becomes an acceptable and in fact standard way to live.

This is the real problem we face as our debt bubble crumbles the pool of people willing and able to buy a wide range of assets at "cheap" prices has been so depleted that you simply don't have enough qualified buyers for our assets at any price. Sure you can keep using cheap credit to lure in unqualified buyers but this is simply eliminating future qualified buyers by getting these people to jump in using the old lax standards. These people are removed from the pool of future potentially qualified buyers and they do nothing really but delay the number of defaults in any given year.

Finally the backlog of loan defaults and unsold foreclosed homes is huge. Slowing the rate they enter the market does nothing its like putting a small dam upstream of a large dam with a hole in it. Its effects if any only show when the larger lake is finally drained.

So you should be able to see our real problem going forward is simply that so few people have decided to step back form the edge that we don't have a bastion of wealth available to stabilize our economy its gone we collectively are broke the prudent borrowers are simply to few in number to create a safety net to prevent our economy from crumbling.

And finally of course this is happening with numerous resources reaching peaks or declining and populations in many parts of the world at the limit of the capacity of the region. This will prevent us from using labor to transform raw materials into wealth at a rate required to dig out of this hole. We can't use money to rev our economy by borrowing short to expand our raw material usage to generate wealth.

So we are facing a double bankruptcy problem lack of financially prudent savers and lack of real resource wealth.
On top of course we face and unknown global warming problem.

The way to win of course is to pull back and retreat as fast as possible its time to turn and run for our lives.
Not only do you give up on growth you aggressively collapse the system well past its stable point then allow it to
grow slowly back to where its stable. Its a game of triage your goal is to provide the minimum standard of living for the most so that the worst ravages of poverty are averted then rebuild slowly a stable society based on renewables.

I'd suggest that the chances of us recognizing that retreat is the only solution much less implementing it our slim.
We are not going to take Nates graphs and reverse them giving future generations the wealth to slowly pay off the excess of today. The real reason we need this massive retreat is simply to give back to the future generations what we have taken. Enough is left that if we cut our resource usage by 50-75% future generations will have the resources to make the right decisions.

We of course will not do this.

I have been saying that the 21st century is going to be one long exercise in giving up things.

Income level and material lifestyle are important factors in determining how successfully a given individual may be able to adjust to the realities of a far less energy intensive and money constrained future. However there is an even more important determiner; membership in a community of friends and neighbors who are willing to work together to meet the challenges that an era of scarcity will bring. I spent roughly two decades living in small, remote Eskimo and Indian villages of northern Alaska. This included studying their traditional subsistence based lifestyles. They lived in frequently difficult environmental settings and overcame hardships that many in the modern world would consider overwhelming. They were unquestionably a hearty and innovative people conditioned to make the most of their surroundings. However, their real survival strength was to be found in their ability to work together in small groups, sharing both the demands and rewards of life. The image of the self-reliant and independent mountain man was the opposite of the aboriginal model. They thrived, because they worked together. In one small Eskimo village there was a saying, "Nobody goes hungry - unless everyone goes hungry." These were a people who went out in frail, skin covered canoes to take on whales and walrus. Cooperation and sharing were the foundations of their cultures. I suggest adjusting to the challenges of the fast approaching future of less energy and material wealth will require a level of cooperation and sharing like that of the traditional Eskimos and Indians of the far north.

I was thinking of that Zebra picture and the quote by Eric Hoffer and this came to mind: Thou shalt not covet thy neighbor's..--> covetous, syn. envious, emulous is a similar term = <<1. eager to surpass others, 2. characterized by or arising from emulation or imitation>>

See the TED Talk by Martin Seligman on happiness:

http://www.youtube.com/watch?v=9FBxfd7DL3E