As times change, so do trends. In the old days, the louder and more powerful your car, the better. Now, green is the name of the game and everyone wants to drive super quiet, efficient hybrids.

The “next big thing” our friends at The Daily Reckoning recently predicted, “will be downsizing, cutting back, making do. Barely on the radar screen now, thrift is coming into focus more clearly day by day. So far, people are a bit embarrassed about it…a bit ashamed that they have had to cut back. But soon, it will be popular…fashionable…and, finally, almost obligatory.”

This new austerity craze — if/as/when it arrives — will impose hardships on many American companies. But a select few might actually benefit.

The cause(s) of downsizing are pretty clear. Home values are falling so sharply that very few homeowners can still pull equity out of their houses. Stock prices are also drifting lower, more or less. Meanwhile, inflation is ramping up.

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Prices are rising in Europe as in America. Bread is up 12 percent in Germany over the last 12 months. Butter has gone up 45 percent. Milk, 25 percent.

Higher prices often stem from printing more dollars. “Force-feeding the rest of the world $2 billion per day (more consumption),” Warren Buffett reminded us last week, “is inconsistent with a stable dollar (more inflation).”

We share Mr. Buffett’s concern. Bernanke keeps printing. Politicians keep promising. Bridges keep crumbling. Wars keep spending.

With regret, we read last week that the projected total cost of medical care for U.S. veterans of the Iraq and Afghanistan wars will top $500 billion, a figure on par with the total military spending to wage these wars to date. And speaking of military might, Defense Secretary Robert Gates estimated in testimony before the Senate Armed Services Committee that the Pentagon will spend upward of $685 billion next year alone. That’s $170 billion more than the $515 billion the president proposed in his first-ever $3 trillion budget.

If that weren’t enough, Gates doesn’t even expect that number to stick. “I have no confidence in that figure,” he admitted. You can expect the estimate to rise in the near future.

A hundred billion here…a hundred billion there. Who’s counting?

Apparently, no one.

But that’s not to say the S&P can’t weather the storm. The companies representing the Standard & Poor’s 500 index now derive 49 percent of revenue from foreign markets, up from 30 percent in 2001. Meaning, those with money to burn (Southeast Asian consumers) should keep earnings reports strong. Stronger repatriated currencies should only bolster this trend.

Unfortunately, many Americans believe a strong S&P equals a strong American economy. We tend to see another American economy. We see an economy riddled with debt, more debt and even more debt. We see the American consumer eerily close to tapping out. Thirty-four percent of Americans now believe they are among the “have-nots.”

It serves to reason. More than 405,000 homeowners lost their homes to foreclosure last year.

Most middle-income Americans, the ones driving our buy-now, pay-later economy, have spent well beyond their means. Americans currently perpetuate a negative savings rate. That can’t last forever.

~~~~~~~~~~~~~Special~~~~~~~~~~~~~

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Cheap oil and cheap credit have fueled this era of consumption…this gilded age of instant gratification.

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