The End of the Decade of the American Consumer. The Regime of new Austerity and Consumer Economic Feedback.
The American consumer has become addicted to easy access to debt. This has gone on for so long that debt is now as vital as air to the survival of our consumption based economy. This is probably no revelation to you or for those that you know. Yet the great taboo of American culture is that we rarely openly talk about money. We talk about religion, politics, sports, and other topics but when it comes to money people seem to grow uneasily quite. People see someone driving a new Mercedes and assume an association to wealth but little do they know that the person has a $700 monthly lease and is living paycheck to paycheck. Yet the visual impact causes many American consumers to suffer from the Keeping up with the Joneses complex. Unlike Prozac, there is no pill for spending more than you earn. However, if we look at local port traffic and the amount of empty containers we realize that the American consumer is broke.
Breaking the Consumer: Exporting Empty Containers Declining. Consumer Credit is contracting at Rapid Pace. Is the Consumer Treadmill Showing Signs of Exhaustion?
If you know where to look, the American consumer is not buying into the U.S. Treasury and Federal Reserve great debt experiment. Port traffic is still declining and indicators show no sign of a major resurgence. If you look at the recent weak outbound pace of containers that are empty what we can expect is continued weak demand for imported consumer goods. Given that most of our goods are imported, this is a bad sign for our local economy but also global economies that produce those goods.
The Art of Strategic Mortgage Defaults: The Coming Wave of Foreclosures in California. 588,000 People Nationwide Stop Paying Their Mortgage Even Though they had Funds to Pay.
Throughout the current housing crisis, most of the negative economic data has been clumped into one large group. That is, housing has been a nationwide problem and job losses have impacted virtually every state. Yet there is a coming crisis that has its targets on very specific states. In fact, many states will not even feel the repercussions of this new economic problem. The issue is that of strategic defaults. Most Americans have not heard of this term but they will know this intimately like they learned about subprime loans or interest only loans.
The U.S. Balance Sheet: Households See Net Worth Down by $12 Trillion Since Peak and Total Debt Floating in the Market of $33 Trillion.
The Federal Flow of Funds report was released on Thursday with an expected jump in household net worth. When we did our last report, we stated that with the $13.89 trillion in wealth that evaporated to the trough, we would expect a jump in net worth to come from the massive stock market rally. The report shows this paper wealth gain that started at the end of Q1. Household net worth increased by $2 trillion from the first quarter to the end of the second quarter of 2009. Much of the increase came from the $1.36 trillion increase in corporate equities and mutual funds. Real estate grew by $139 billion. Yet this increase is merely a reflection of all the liquidity being flushed into the equity markets by the Federal Reserve.