More Good Economic News..."2009 Consumer Crash UNDERSTATED"

[renie408]

http://market-ticker.denninger.net/archives/550-The-2009-Consumer-Crash-Call-is-UNDERSTATED.html

"...but in fact it is much worse than it looks. Why? For the same reason the rest of these charts are worse than they look - they portray averages, but not distributions.

And it is the latter - distribution - that is the real problem.

See, there are a very large number of people - perhaps much as 25% of America, that have no debt at all. Not even a car loan. I'm one of them, and in fact this has been, in the main, my viewpoint since I was a youngster.

Yes, I've had car loans and mortgages, but I never was one to run a credit card balance or charge plate at a store. Ever. There are quite a few people like me, some of them older, some younger, but not everyone is in debt up to their eyeballs.

This may sound encouraging. In fact, its not. Its quite discouraging, and seriously so, because for every person who is prudent, there is one who is doubly underwater to the degree depicted in the graph.

The impact of this will not sink in until you think about it. There are plenty of people, including those on Kudlow every night, who try to claim that "the consumer's debt load, while rising, is manageable."

They're looking at this same graph you are above, and while they are alarmed, they're saying "oh, yes, its a bit over 1x income, but that's not horrible given that debt service is in the low teens as a percentage."

What they're missing is that there is 20% of our population that is being utterly smashed, with debt to income ratios north of 300% and total debt service requirements in the 60% range or more!"

[Union Thug]

1. What they are also missing is that credit cards and other easy

credit sources have destroyed this country. It's contributed to declining wages and benefits for workers and keeps people enthralled to the real owners of country. This is only a crisis for the middle, working classes and the working poor. The wealthy don't give a shit - it's not them who are suffering.

[renie408]

2. Amen. n/t

[Joe Chi Minh]

7. And, most ironically, didn't I read that if you didn't have stuff on credit, you were

given a bad credit rating? Or have I got that wrong.

[Warpy]

3. That's one of the things I've been saying all along

and that is if you want to know where depressions come from, follow the debt.

When you have a significant percentage of the population substituting debt for adequate wages and this is what is keeping the economy "healthy," look out below. At some point their debt load is going to start to cut into subsistence and when that happens to enough people, the consumer economy simply grinds to a halt. THAT is a depression, not some external calamity like a housing or stock market crash, although either might precipitate it.

We're staring down the barrel of a depression right now as the only thing keeping this economy running has been the average family's easy access to credit, either by using their house appreciation in a bubble market like an ATM or by running up multiple credit card debts. Wages have been depressed for the past 30 some years and the only way to give the illusion of growth was through DEBT.

Without this seemingly unlimited access to debt, this economy would have crawled to a standstill a decade or more ago as people trying to live within inadequate means simply did without everything but food and basic clothing.

When wealth concentrates at the top into the fewest hands possible and debt is substituted for wages at the bottom, the economy can't sustain itself for long. We're about to find that out again.

GOP economic dogma has never changed, not from the Robber Baron age to the Roaring Twenties to now, and it always has the same result: wealth is stripped from the working classes and handed to the few. Eventually they kill off the economy and reforms are enacted until enough people who remember what started the whole mess die off and they do it all over again.

Maybe this time we'll raze the Chicago School of Economics to the ground and sow the earth with salt and plutonium as a permanent reminder of what economics of the country by the rich and for the rich does to us every single time they trot it out with a new vocabulary. Maybe this time we'll learn.

[truedelphi]

5. Not a sentence or even a phrase of yours to disagree with

Right down to sowing the earth with salt and plutonium.

And boy, do I ever wish that we (as a society) would wake up and learn.

[tama]

11. "Maybe this time we'll learn"

And when Kissinger or some other "political realist" asks you, "are you ready to give up all the consumerist priviledges and niceties that capitalistic (and other) imperialism provides you and go back to "primitive" self-sufficiency?", what is your answer, what have you learned?

[Warpy]

13. I've learned that no matter how clearly I attempt to explain things

someone will always manage to miss the point.

:evilgrin:

[bulloney]

4. Several business managers I stay in contact with think the economy's worse than stated in the media.

They think we'll really hear bad economic news after the elections.

I've said for years that a plunge or collapse in our economy has been delayed by the easy credit people can access. You can only do this for so long, and eventually, you'll have to pay the piper. Peoples' real wages have been in decline. Many of these same people have attempted to sustain or increase their standard of living with credit cards and other forms of debt. And banks and other creditors have been too happy to accommodate them. But now, the shit's about to hit the fan, I'm afraid.

[renie408]

10. Me, too and I am not a business manager. I can tell by the way people are

ditching their toys. We have horses. They are always the first thing to go when the economy sucks. These days the ONLY things selling cost in excess of $20K or less than $2K. Anything in the middle is just not moving. And you can get a DAMN nice horse these days for $1500 to $3000. A horse you would have paid $10K for a year ago. I had to sell a wonderfully broke large pony hunter a few months ago for $2800. He would have brought between $6500 and $7500 a year ago. Check out the prices (and numbers for sale) for ATV's, sailboats, horses, bass boats, jet skis, etc. Around here, just about every corner has a boat, motorcycle, golf cart, jet ski, etc sitting on it with a for sale sign. All that stuff that people paid top dollar for on credit, they are ditching for bargain basement prices now.

[judasdisney]

6. President Barack: Set-up to be a scapegoat, walking into a trap

[lonestarnot]

8. Damn straight distribution is the problem, and I'm not afraid of their class war threats either!

[Joe Chi Minh]

9. This site linked to on Joe Bageant's site, joebageant.com will make

your hair stand on end:

http://www.energybulletin.net/node/23259

[tama]

12. Yup

To put it in larger perspective of EROI and "brittle systems" and falling from tall: http://www.theoildrum.com/node/4411#more