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Page last updated at 10:53 GMT, Wednesday, 28 January 2009

Miami consumption

By Matt Frei
BBC News, Washington

A foreclosure sign stands in front of a home in Miami Beach, Florida, 22 January 2009
Miami's housing market has been hit hard in the economic crisis

I love Miami. You have to ask people in Spanish if they speak English. The summer heat burns like a fever. The winter sun warms like a bath.

While the rest of America shivers Miami heads to the beach accompanied by Salsa music, looking forward to the first mojito of the day.

These are the seductive ingredients that made property prices more than double during the bubble, car ownership grow fourfold and credit card debt increase fivefold.

Consumption mushroomed while real incomes barely grew at all. Southern Florida was America on steroids. Here, the ability to borrow was as limitless as the Everglades shimmering in the heat, and good sense was blinded by the sun.

Frozen giraffes

Miami is ground zero of the sub-prime crisis. I was there this week and something else suddenly dawned on me.

Yes, the skyline that once seemed dotted with opportunity is scarred by excess and decline.

Yes, the cranes that have stopped swivelling over the luxury condos because the construction has ground to a halt look like frozen giraffes.

Yes, the billboards announcing foreclosures, bank sales and cheaper homes at unbelievable bargains now look like the tombstones of Florida's toppled prosperity.

And, yes, we could get a table at a very good fish restaurant without making a reservation two days in advance.

So much of the prosperity we took for granted was based on consumption that was conspicuously conspicuous

But look at the people and you notice a few things.

No-one seems to be truly suffering. Cars still congest the streets. People still watch TV on flat screens. No-one is going hungry and although foreclosures have become an epidemic, the homeless shelters are not exploding.

Michelle made a mint as a sub-prime mortgage broker and now she, herself, faces foreclosure - she was both perpetrator and victim of the bubble.

There is an irony about her good cheer and heaving optimism. She stands to lose the four-bedroom villa with pool that she and her two daughters, her Colombian mother and her boyfriend share.

"We may have to move to a smaller apartment," she tells me.

They have already lost two cars to the repo man - but they still have the black Hummer and the Sedan.

Two doors down, number 4235 stands empty.

The grass has not been given a buzz cut for a few weeks. The blinds are down and torn. The plague of foreclosure has arrived in the neighbourhood.

No holiday

Meanwhile, these are the things Michelle is not buying these days: no speed boat, no new car, no new curtains - the ones she has are fine.

There will be no holiday in Vegas and no new bikes for the girls - the ones they got for Christmas last year are still in perfect working order.

She is not going out to dinner as much as she used to. She has stopped buying a new handbag every month and she begrudgingly admits that she does not really need to live in a dream home. She just wants to.

You get the drift.

So much of the prosperity we took for granted was based on consumption that was conspicuously conspicuous.

We did not need most of the things that we bought on credit and that were produced cheaply for us by China, Vietnam or India.

We were, if we are being honest, perfectly comfortable without them. We are living in a saturation economy in which demand was fuelled by a combination of superb advertising, peer pressure and easy credit.

Such an economy cannot cope with the fear of losing a job. That is why the declines in consumer confidence and consumption have been so dramatic.

We have stopped buying the things we do not really need.

And there are a lot of them.

Yet none of us are missing any meals. Most of us are not homeless. And that is the absurd tragedy of the vicious cycle we are in.

Without our conspicuous consumption, China's economy cannot continue to grow at 8% a year and the US cannot create 100,000 jobs a month, to keep in line with population growth.

President Bush's glib post-9/11 advice to America to just go out and go shopping seems rather prescient these days.

But if we stop all conspicuous consumption, then our economic woes may become a self-fulfilling economic catastrophe that is more worrying than any we have previously experienced.

Can the billions of dollars borrowed from the tax-payer inject confidence into the banks to resume lending and confidence in us to resume spending?

Not for a while, I think.

So, the only thing we have to fear is not fear itself but contentment.

Matt Frei is the presenter of BBC World News America which airs every weekday on BBC News, BBC World News and BBC America (for viewers outside the UK only).


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