The four stages of a complete Cycle in a Consumer-based economy

Analyzing the mass psychology of consumerism is becoming a cottage industry these days. Rather than refer you to other ponderous sources, let me explain the Cycle in simple prose:

First, we spend money we have. With few exceptions, the United States spent the first 100+ years of its existence with relatively little in the way of burdensome debt. If one couldn't pay cash/barter with labor for a particular item, then it would not be acquired. A reasonable amount of borrowing came into vogue in Post-World War II society (the GI Bill and whatnot), but I would tend to include that kind of debt here and not in the next phase below simply because the debt made complete sense in relation to current collective income and growth prospects. This is the foundation of a capitalist economy and, although there may be mini-booms and small recessions, it mostly works out well.

Second, we start spending money we don't have. This phase actually started in the 1960's with the Johnson administration's "Guns and Butter" policies. Later, in the 1980s/90s and most clearly in the Housing bubble of 2003-2007, society got more and more comfortable with a lifestyle that was detached from current income. It's not enough, as is the wont of human desire, to be content. We have to get the SUV, the bigger house, the granite/stainless steel kitchen upgrade, and so forth.

Third, as we reach the outer limits of borrowed money against future earnings and our credit lines from item #2 start dwindling, we stop spending money we don't have. This is where we currently are in the cycle, and the denouement is vicious. All the economic gains from item #2 are exposed as an illusion, built on the shifting surface of loose lending standards.

Fourth, as the populace is slowly but surely panicked into mass-saving after having seen the end long-term results of item #2 and #3, we stop spending money we do have. This has been the situation in Japan for at least the past 10 years, where the savings rate until recently has been something on the order of 12% (for comparison, the savings rate in the U.S. is very close to Zero percent). Could it take a decade of fearful nut-gathering before the U.S. Consumer Squirrel comes out of hiding again? Stay tuned.