Years ago, I read in a book whose title I can't quite remember, about economists observing something curious in inflation-wracked Argentina: Consumers were no longer saving money.  They were spending instead, spending on themselves, buying up luxury goods in conspicuous consumption, and no, it was not a sign of economic health. Saving money made absolutely no sense as the Argentine peso kept losing value. Far sensible to rack up credit card debts and pay with devalued money or else default.

Maybe it was by Paul Blustein, who wrote about the bankrupting of Argentina; his book was called "And the Money Kept Rolling In (and Out)."

But Jason Ma at Fortune magazine has found a respected economist here who is starting to see the same thing:

An economist offered an explanation for a paradox that has emerged in recent data showing that spending has remained robust even as consumers report feeling pessimistic.

Joanne Hsu, who is the director of the University of Michigan's consumer sentiment survey, told CNBC on Friday that she thinks Americans have abandoned plans to save money as they see their financial goals look less attainable and are spending money instead.

"This positive spending is not a reflection of some sort of internalized secret sense of confidence that consumers have," he explained. "And instead my interpretation is that consumers see that a lot of aspirational goals that we talk about as part of the American Dream—homeownership, paying for college, paying for college for your kids, having a comfortable retirement—with high prices and high interest rates right now, those aspirational goals just feel increasingly out of reach."

And as a result, consumers have "given up" on saving for those goals, Hsu added, noting that the still-strong labor market allows them to spend now.

That's a terrible statement about what Americans think of their financial futures, and it's coming from a very strong source, as the University of Michigan index is one of the country's most accurate. By spending instead of saving, they are no longer focusing on the future. Savings is the basis for all wealth creation, but, again, it makes little sense to save as inflation continues to go up. Nothing eats savings, or wealth, quite like inflation.

So not surprisingly, credit card debt is up among other things, with many maxxing out their cards.

Vox, which didn't understand the pattern the University of Michigan economist did, that consumers had lost faith in the future, did have a useful chart on what Americans were raising their spending on in the first three months of 2024 versus the last three months of 2023.

One was financial services -- such as servicing credit card debt -- which saw a 7.9% increase. The third item was clothing and footwear (read: designer handbags), which rose 5.3%. The fourth item was "recreation services" which rose 4.8% (concerts? admission fees?). The fifth was "transportation services" (read: airline flights.) The sixth was furnishings and household durables, up 3.9%. The eighth highest item was food and beverages purchased for off-premises consumption (read: fast food, maybe groceries). What fell was automobile purchases, which of course, take some savings to purchase. Those were down, as were purchases on gasoline, recreational goods and vehicles, and other things that take some savings.

Nicole Narea at Vox wrote:

That was all supposed to come crashing down at some point. For more than a year, economists warned about the “death of the consumer” and a resulting recession — neither of which have materialized. Consumers were expected to retreat as inflation skyrocketed, hitting a 9.1 percent peak in June 2022 and remaining stubbornly above the Federal Reserve’s target rate of 2 percent.

Instead, Americans just kept buying more, even accounting for price increases and beyond growth in their disposable income. Their spending helped drive US economic growth in 2023 and remained high in the first months of this year. In March, consumer spending increased by 0.8 percent, exceeding expectations from financial analysts.

That's a terrible thing to drive U.S. economic growth, the eating of one's seed corn.

The nutty spending doesn't last forever, of course, as Argentina demonstrated. Soon enough the bottom drops out of the employment market, joblessness rises, and there isn't even enough money to spend on necessities. This was how Argentina got to its 40% poverty rate.

America right now is the canoe upstream just heading over to the falls Argentina already went down over. The kind of spending we see now is not economic growth spending, but economic despair spending. It's a terrible thing for a country such as ours to see that people have lost faith in their future.

But that's what Joe Biden has brought us in more ways than one, the full Weimar America effect as the nation heads off the cliff and spending is now happening as though there is no tomorrow because ... there is no tomorrow.

Image: Conspicuous consumption by Nick Youngson CC BY-SA 3.0 Pix4free