Breaking news from the Wall Street Journal: American Consumers are overextended

[Slimprofits]

Reality is setting in? I guess it qualifies as their flow of funds preview.

On Borrowed Time: Consumer-Led Recovery
By MARK GONGLOFF
June 9, 2009

Before pricing in a rapid economic recovery, investors might consider the fundamentals of the economy's workhorse -- the U.S. consumer.

Despite recent frugality, consumers have barely dented their debt load. The Federal Reserve will offer a fresh peek at that mountain on Thursday, when it releases its "flow of funds" data for the first quarter.

[..]

Money is easy again, but unemployment is far higher and wage growth slower than at any time during the 2001 recession.

Households have also now suffered the bursting of two bubbles -- housing and stocks -- carving $12.9 trillion from their net worth since the second quarter of 2007. The recent market rally should bolster household balance sheets, the flow of funds data might show. But real estate is still the biggest household asset, at 36% of net worth, and prices haven't stopped falling.

[..]

Credit should improve, but the era of easy credit is over, suggesting household debt could fall closer to a mere 100% of disposable income. That could sap at least $3 trillion in household borrowing from the economy -- hardly a recipe for a V-shaped recovery.

You don't say!!!!

p.s. Mark is actively replying to comments attached to this article

[santafe2]

Re: Breaking news from the Wall Street Journal: American Consumers are overextended

Is it not an iTulip assertion that consumer spending will fall to roughly 60% of GDP from the high of 70-71%? If spending is falling but GDP is falling at the same rate, that's not going to create an ideal outcome. Talk about a race to the bottom.

[audrey_girl]

Re: Breaking news from the Wall Street Journal: American Consumers are overextended

Is it not an iTulip assertion that consumer spending will fall to roughly 60% of GDP from the high of 70-71%? If spending is falling but GDP is falling at the same rate, that's not going to create an ideal outcome. Talk about a race to the bottom.

I think your verb is incorrect here. Don't you mean "crash" to the bottom?

[vanvaley1]

Re: Breaking news from the Wall Street Journal: American Consumers are overextended

Reality is setting in? I guess it qualifies as their flow of funds preview.

On Borrowed Time: Consumer-Led Recovery
By MARK GONGLOFF
June 9, 2009



You don't say!!!!

p.s. Mark is actively replying to comments attached to this article

"But real estate is still the biggest household asset...and prices have not stopped falling." I've been wondering bout that. Is this an accident, market forces, a process, and/or a plan?Why has there been such a dismal attempt to lessen the burden on real estate debt to the consumers?

Somebody correct me if I wrong but hasn't the number of years after declaring bankruptcy and walking away from a house just been reduced from seven years to five years before you can purchase another house? Isn't the timeline for a bottom of the real estate market to be in about five years from now according to Shiller? Would interest rates be higher for mortgages at that time? Would those that walk away from housing today be more able to bear the burden of mortgage payments if the housing prices continued to drop substantially and thus they could more easily qualify for the house?

Is this all speculation that the banksters and the government crony capitalists are allowing the prices to plunge in order to reignite the FIRE economy at a later date when circumstances are more favorable for an ignition?

[santafe2]

Re: Breaking news from the Wall Street Journal: American Consumers are overextended

I think your verb is incorrect here. Don't you mean "crash" to the bottom?

Good observation but isn't crash the noun? As in, race to the crash.

[metalman]

Re: Breaking news from the Wall Street Journal: American Consumers are overextended

Is it not an iTulip assertion that consumer spending will fall to roughly 60% of GDP from the high of 70-71%? If spending is falling but GDP is falling at the same rate, that's not going to create an ideal outcome. Talk about a race to the bottom.

how to find itulip stuff...

step 1...

google site:itulip.com pce gdp

1. Bureau of Economic Analysis: GDP & Profitability - iTulip.com
   
   3 posts - 3 authors - Last post: May 29
   The smaller decrease in real GDP in the first quarter than in the fourth reflected a larger decrease in imports, an upturn in PCE for ...
   www.itulip.com/forums/showthread.php?t=10131 - Cached - Similar pages
   
2. Did someone say, ``Housing market recovery?'' - iTulip.com
   
   We are reminded of the crash up of PCE to GDP from 75% to 81% in the first year of The Great Depression as GDP collapsed even faster than PCE. ...
   www.itulip.com/forums/showthread.php?p=100985 - Cached - Similar pages
   
3. Funhouse Mirrors #1: Personal Savings Rate [Archive] - iTulip.com
   
   9 posts - Last post: Nov 1, 2007
   Diverting attention to the (core) PCE instead of the CPI (the PCE is used to adjust the GDP, and is preferred by the Fed, because it is the ...
   www.itulip.com/forums/archive/index.php/t-2328.html - Cached - Similar pages
   
4. BLS: GDP falls 6.1% in the first quarter of 2009 - iTulip.com
   
   In the fourth quarter, real GDP decreased 6.3 percent. ... I think that this PCE increase vs last quarter decrease may simply represent people looking for ...
   www.itulip.com/forums/showthread.php?t=9681 - Cached - Similar pages
   
5. Bernanke says CPI & PCE Overstate Inflation [Archive] - iTulip.com
   
   "If you adjust the real GDP numbers that the government releases for the ... If cost of living raises track CPI, but the fed follows PCE, isn't there a ...
   www.itulip.com/forums/archive/index.php/t-14.html - Cached - Similar pages
   
6. Ghost of Joseph Schumpeter and the second end of the Monthly ...
   
   20 posts - 16 authors - Last post: Mar 20
   By 1929, personal consumption expenditures (PCE) grew to 75% of US GDP and briefly spiked to 83% in 1932 as GDP collapsed faster than PCE ...
   www.itulip.com/forums/showthread.php?t=8839 - Cached - Similar pages
   
7. Inflation Peaks/Real-gdp Peaks/Interest Rates Peak - Page 2 ...
   
   (1) As their statements indicate, the FOMC breaks down both real-gdp & the core PCE as a policy standard. The Fed won't let the economy decelerate to where ...
   www.itulip.com/forums/showthread.php?p=13789 - Cached - Similar pages

plus 100 pages of other itulip stuff.

step 2...

click on a link...

Ghost of Joseph Schumpeter and the second end of the Monthly Payment Consumer

step 3...

read the stuff there...

Wrong lesson

The Federal Reserve mistakenly believes that the lesson of 1930s was to re-inflate a credit bubble quickly before its collapse becomes self-reinforcing, when in fact the lesson lost was to not allow a credit bubble to form in the first place; collapse is inevitable and cannot be stopped but the debt excess canceled either by monetary deflation or inflation, and the Fed is committed to the latter path.

End of the second credit and consumption-based US economy in 70 years, forecast in red

The economic crisis will again turn a generation of Americans into savers and critical consumers that look at total prices of goods, not monthly payments, and avoid debt. The era of mass marketing of consumer credit and riding the wave of debt-financed consumerism of the past 25 years is over. Only those companies that prepare for this sea change in consumer attitudes will survive.

[santafe2]

Re: Breaking news from the Wall Street Journal: American Consumers are overextended

how to find itulip stuff...

Ask Metal...sorry dude, you're the iTulip encyclopedia.

[dummass]

Re: Breaking news from the Wall Street Journal: American Consumers are overextended

I hope your getting paid. A free subscription or something.

[cjppjc]

Re: Breaking news from the Wall Street Journal: American Consumers are overextended

I hope your getting paid. A free subscription or something.

I think for Metal, posting iTulip threads is it's own reward. When I first came here I always took the links he posted, and would then hit another link. Sometimes it could take me over an hour to get back to where I started. There is so much good stuff here.