"Worst Is Yet to Come:" Americans' Standard of Living Permanently Changed

[Liberal_in_LA]

http://finance.yahoo.com/tech-ticker/article/176478/%22Worst-Is-Yet-to-Come%22-Americans%27-Standard-of-Living-Permanently-Changed?tickers=WMT,WFMI,FDO,^GSPC,^DJI,RTH

"Worst Is Yet to Come:" Americans' Standard of Living Permanently Changed
Posted Feb 17, 2009 12:53pm EST by Aaron Task in Investing, Recession

There's no question the American consumer is hurting in the face of a burst housing bubble, financial market meltdown and rising unemployment.

But "the worst is yet to come," according to Howard Davidowitz, chairman of Davidowitz & Associates, who believes American's standard of living is undergoing a "permanent change" - and not for the better as a result of:

* An $8 trillion negative wealth effect from declining home values.
* A $10 trillion negative wealth effect from weakened capital markets.
* A $14 trillion consumer debt load amid "exploding unemployment", leading to "exploding bankruptcies."

"The average American used to be able to borrow to buy a home, send their kids to a good school buy a car," Davidowitz says. "A lot of that is gone."

Going forward, the veteran retail industry consultant foresees higher savings rate and people trading down in both the goods and services they buy - as well as their aspirations.

The end of rampant consumerism is ultimately a good thing, he says, but the unraveling of an economy built on debt-fueled spending will be painful for years to come.

[babylonsister]

1. Maybe some pain is needed. I'd prefer the word 'reality'. nt

[Peacetrain]

2. Many have been there for quite a while now..

[daninthemoon]

3. the party's over, and probably none too soon. i wonder if this is the

time to just kind of yank the bandaid off all at once and get it all over with. then we can see what this new America is going to be like. i know that in my home finances, there is no way that borrowing more money gets rid of debt i already have, and i assume the same will ultimately be true for the country. the bailouts may be worse than doing nothing in the long run, but who knows? i just hope that the stimulus gets us off the fossil fuels. until that is done, we have no hope for recovery at all.

[Terran]

4. That's okay, we needed some adjustment.

It's not the end of the world if people can't afford two Hummers and a McMansion. Maybe priorities will be a bit straighter from now on.

[firedupdem]

5. There's a sad state of affairs right now. I've always been pretty

frugal but the lack of employment is killing me. I worry for my son, one year from graduation and saddled with student loan debt. I hope there is something out there when he's done so he can pay the loans back. I'm sure we'll have to help him and right now I don't know how the hell we'd be able to even do that.

[rvablue]

6. I'd like to visit Howard Davidowitz's home in 2-3 years...somehow

I think his standard of living, i.e. buying a home, and a car and sending his kids to school, won't change.

[democracy1st]

7. Howard Davidowitz is a rightwing idiot,always has been will never change

[depakid]

9. Yep- and ever the advocate of public education

[Raine]

8. In the long run this change will be a good

thing, hopefully people will realize that material goods aren't the key to happiness.

[Bullet1987]

10. I doubt it stops our military spending and stupid ass wars...

they'll always tax the American people for that no matter what.