Too bad Pulitzers aren't handed out for blog-entries. This year's award would go to Zero Hedge for its "The 'Money on the Sidelines' Fallacy" post. This short entry shows why the economy will continue its downward slide and why the US consumer will not get off the mat and resume spending as he has in the past. The fact is the Net Wealth of US Households has "declined from a peak of $22 trillion to just under $12 trillion in early March."
Ouch!
The problem is compounded by the fact that Total US Household debt, as of first quarter 2009, amounts to roughly $13 trillion, and has stayed within that range for the last 3 and a half years.
Zero Hedge:
"From the end of 2007 through Q1 of 2009, household equity has declined by 94%. Is it surprising that today's GDP number would have been a complete debacle if the consumer had been left alone to prop the U.S. economy, on whom 70% of the economy is reliant? Obama pulled a Hail Mary with the stimulus: without it there would be no debate America is in a depression right now." Source
What does all this mean?
It means the consumer is down-for-the-count. His credit lines have been cut, his home equity eviscerated, and his checking account swimming in red ink. That spells trouble for an economy that's 70% dependent on consumer spending for growth....which brings us to another interesting point. The uptick in GDP last quarter was almost entirely the result of the surge in government spending; ie "fiscal and monetary stimulus". How long can that go on? How long will China keep slurping up US Treasuries rather than let their currency rise? Here's a clip from the Wall Street Journal on Friday:
"Shaky auctions of Treasury notes this week reignited concerns about whether the government can attract buyers from China and elsewhere to soak up trillions in new debt.
(snippet)
Bernanke's had a good go-of-it, juicing the market through the backdoor and concealing--as much as possible--who is still buying US Treasuries. (who knows; maybe it's the Fed buying its own paper offshore?!?) But what good will it do? The US consumer is broke; the tank is on empty. Household equity has declined by 94%, jobs are scarce, personal savings are rising, and families are cutting back and hunkering down. It will take a decade or more before household debt is whittled-away to a point where people can consume at pre-crisis levels. Another stock market bubble won't change a damn thing. This Depression is just beginning.
More Here
Going through all these disastrous headlines, one would think something major would have happened by now.
ReplyDeleteNot really, since the gov't is holding up the economy with fake printed money, it is inevitable that many of these headlines will be coming true soon. You are only being warned. 98% will discard these headlines and become paupers without protecting their assets.
ReplyDeleteSo true - inc the part about the Fed buying back the Treasuries via their dummy corps in the Cayman Islands. The fraud of the Fed knows no bounds.
ReplyDeleteIt is not fraud, just recycling their illusions
ReplyDeleteof recovery to pass the ball to team 2012.
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ReplyDeleteWhat's so civil about civil war?
ReplyDeleteBetter get ready. Stock food and water, don't forget Ammo. Something evil comith this way.
ReplyDeleteThe groundwork has been laid out to make this country into nothing but an openly militarized Empire. No need for a draft when killing for Uncle Sam is the only way to get a meal.
ReplyDelete