Monday, August 03, 2009

The American consumer is down-for-the-count and the Depression is just beginning

The American 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.

The Net Wealth of US households has declined from a peak of $22 trillion to just under $12 trillion in early March. Household equity has declined by 94%.

And this against the backdrop where the banks are still broke, business investment is at historic lows, consumers are on the ropes, the unemployment lines are swelling, the homeless shelters are bulging, the pawn shops are bustling, tent cities are sprouting up, and according to MarketWatch, “Corporate insiders have recently been selling their companies' shares at a greater pace than at any time since the top of the bull market in the fall of 2007.

Hundreds of banks are being kept on life-support but the FDIC is down to its last few farthings, and doesn't want to ignite a panic.

There are also worrying signs that China and other foreign investors may be ratcheting back purchases of treasuries at a time when the U.S. is seeking to fund a $1.8 trillion budget deficit.

This Depression is just beginning.

[Excerpts of an article by Mike Whitney]

1 comment:

Grant Montgomery said...

To reinforce the statement "Hundreds of banks are being kept on life-support",

See new headline:

"Regulators on Friday shut down banks in Florida, New Jersey, Ohio, Oklahoma and Illinois, boosting to 69 the number of federally insured banks to fail this year amid the pressures of the weak economy and mounting loan defaults."