The Consumer Economy is over

"Baby boomers working longer hours, for less"

i know that one well. Fortunately, i DO have a job, and i DO get paid, for that i am grateful.


Nice piece PIM, now, i have to get back to work................

The nowpublic site went down acouple of hours ago when I tried to post a comment on Roy's first one:

Here it is:

Unfortunately most of the folks don't understand or know the difference between a recession that can be recovered and a depression that cannot recover but only be restructured. Two totally different chapters in economics. Obama himself may not understand that, but his advisers and certainly Ben Bernake all know that. Instead accepting the facts and start working on it, they continue for unknown reasons, on the wrong road. The ones in charge of the economic health and finance must perfectly understand and know that other medicine is required than stimulus packages, etc. You cannot extinguish a fire with pouring petrol on it. That is what they doing all the time  so far, still thinking with creating more debt, the original debt will be solved. Stupid enough they think crisis can be solved this way… Apparently they cannot come up with more wisdom.

With reference to the other above comments: wait till tomorrow's essay about government, the banks and wall street. Maybe after that more clarity is provided. Complex matters once and awhile have to be simplified, otherwise people won't understand the issue at all.

I look forward to your explanation: as I see it, UK's Gordon Brown has bet everything on recovery, and so far, it is going his way. As the British SAS say (they are the ultra-elite special forces), 'he who dares, wins'. I don't like Brown, but he has got titanium balls on this one. 

I see panic has been caused by the bad consumer report for September. Then that word depression there is little difference with both words yep a recession is a short depression and both can be recoverable its just one takes much longer than the other.

I keep on stating that when a recession starts to recover as this one did back in april this year there are slumps, these are mainly made worst by economist that start shouting depression doom and gloom. We really need to look at the stock markets and the charts before shouting doom and gloom is nigh. Using the Dow Jones theory its started looking good.

iffy asked why do things look better in UK, well that's because their consumer report was not that bad and there are not so many doom and gloom hype merchants such as those in America trying to bring their present administration down. The consumer problem in USA  is that people are not buying many cars this year especially noticed in september. .

I am glad to see that the property market prizes are not rising in USA that in fact very good news over priced property caused the recession in the first place. 

I am not convinced that the recession is not in recovery mode, I am however convinced that hyped fear will slow down the recovery. 

I have noticed that the exchange rates have stated to recover after the September consumer hype. At least the British pound exchange to the Fil Peso looks more healthy today. PIM's its not that bad and I can promise that things will be looking rosier in November and December this year and the recession will end mid next year of which takes it of the possible depression list. . 

Out of interest PIM's how is the Spanish economy doing? 

Very informative post

Great PIM, Economic cycle isn't it.

All participants in this discussion are very much thanked for their respective comments and contributions from different optics about this hot issue. How it really will unfold is unpredictable, that comes at the end of this saga. Meanwhile it is important to highlight factors that do have great influences on the final outcome. It is likely that development of this crisis is less rosy as BF wants us to believe. But it is always good to create counterbalances in order to support better objectivity. Wait and see... a short term solution by the middle of next year is mathematically not in the cards unfortunately.

The economy is Spain is even worse than in America. 20% official unemployment, the data vary widely but to my information and estimates 2 mil houses unsold on the market 80% in the wrong place at the coasts, foreclosures up triple last year, an avalanche of shop liftings, and more to come. PM Zapatero told this summer, 'recession is over in Sept.' now in Oct. it still is worsening.

The "plan" whether conscious or not, is to turn America into a Thailand style economy. There's the central business districts and the outlying areas. As demand picks up in the CBD's cheap labour is sucked in from the provinces and dispensed with again when there's lag. All indicators are simply bent to measure these CBD's as the vast proportion of the economy while the masses are left squatting in the countryside awaiting a chance to be called in. Anyone talented or good looking enough has opportunity to flow into the pipeline of labour servicing the city machine allowing the aristocracy ruling the concrete kingdoms to claim their society is a true meritocracy.

Well done PIM.

What do you think of this op piece in the Wall Street Journal: Excerpt

When the crisis first arose, the left's explanation was that it was caused by corporate greed, primarily on Wall Street, and by deregulation of the financial system during the Bush administration. The implicit charge was that the financial system was flawed and required broader regulation to keep it out of trouble. As it became clear that there was no financial deregulation during the Bush administration and that the financial crisis was caused by the meltdown of almost 25 million subprime and other nonprime mortgages—almost half of all U.S. mortgages—the narrative changed. The new villains were the unregulated mortgage brokers who allegedly earned enormous fees through a new form of "predatory" lending—by putting unsuspecting home buyers into subprime mortgages when they could have afforded prime mortgages. This idea underlies the Obama administration's proposal for a Consumer Financial Protection Agency. The link to the financial crisis—recently emphasized by President Obama—is that these mortgages would not have been made if regulators had been watching those fly-by-night mortgage brokers.

There was always a problem with this theory. Mortgage brokers had to be able to sell their mortgages to someone. They could only produce what those above them in the distribution chain wanted to buy. In other words, they could only respond to demand, not create it themselves. Who wanted these dicey loans? The data shows that the principal buyers were insured banks, government sponsored enterprises (GSEs) such as Fannie Mae and Freddie Mac, and the FHA—all government agencies or private companies forced to comply with government mandates about mortgage lending. When Fannie and Freddie were finally taken over by the government in 2008, more than 10 million subprime and other weak loans were either on their books or were in mortgage-backed securities they had guaranteed. An additional 4.5 million were guaranteed by the FHA and sold through Ginnie Mae before 2008, and a further 2.5 million loans were made under the rubric of the Community Reinvestment Act (CRA), which required insured banks to provide mortgage credit to home buyers who were at or below 80% of median income. Thus, almost two-thirds of all the bad mortgages in our financial system, many of which are now defaulting at unprecedented rates, were bought by government agencies or required by government regulations.

The role of the FHA is particularly difficult to fit into the narrative that the left has been selling. While it might be argued that Fannie and Freddie and insured banks were profit-seekers because they were shareholder-owned, what can explain the fact that the FHA—a government agency—was guaranteeing the same bad mortgages that the unregulated mortgage brokers were supposedly creating through predatory lending?

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When the crisis first arose, the left's explanation was that it was caused by corporate greed, primarily on Wall Street, and by deregulation of the financial system during the Bush administration. The implicit charge was that the financial system was flawed and required broader regulation to keep it out of trouble. As it became clear that there was no financial deregulation during the Bush administration and that the financial crisis was caused by the meltdown of almost 25 million subprime and other nonprime mortgages—almost half of all U.S. mortgages—the narrative changed. The new villains were the unregulated mortgage brokers who allegedly earned enormous fees through a new form of "predatory" lending—by putting unsuspecting home buyers into subprime mortgages when they could have afforded prime mortgages. This idea underlies the Obama administration's proposal for a Consumer Financial Protection Agency. The link to the financial crisis—recently emphasized by President Obama—is that these mortgages would not have been made if regulators had been watching those fly-by-night mortgage brokers.

There was always a problem with this theory. Mortgage brokers had to be able to sell their mortgages to someone. They could only produce what those above them in the distribution chain wanted to buy. In other words, they could only respond to demand, not create it themselves. Who wanted these dicey loans? The data shows that the principal buyers were insured banks, government sponsored enterprises (GSEs) such as Fannie Mae and Freddie Mac, and the FHA—all government agencies or private companies forced to comply with government mandates about mortgage lending. When Fannie and Freddie were finally taken over by the government in 2008, more than 10 million subprime and other weak loans were either on their books or were in mortgage-backed securities they had guaranteed. An additional 4.5 million were guaranteed by the FHA and sold through Ginnie Mae before 2008, and a further 2.5 million loans were made under the rubric of the Community Reinvestment Act (CRA), which required insured banks to provide mortgage credit to home buyers who were at or below 80% of median income. Thus, almost two-thirds of all the bad mortgages in our financial system, many of which are now defaulting at unprecedented rates, were bought by government agencies or required by government regulations.

The role of the FHA is particularly difficult to fit into the narrative that the left has been selling. While it might be argued that Fannie and Freddie and insured banks were profit-seekers because they were shareholder-owned, what can explain the fact that the FHA—a government agency—was guaranteeing the same bad mortgages that the unregulated mortgage brokers were supposedly creating through predatory lending?

[q url="

When the crisis first arose, the left's explanation was that it was caused by corporate greed, primarily on Wall Street, and by deregulation of the financial system during the Bush administration. The implicit charge was that the financial system was flawed and required broader regulation to keep it out of trouble. As it became clear that there was no financial deregulation during the Bush administration and that the financial crisis was caused by the meltdown of almost 25 million subprime and other nonprime mortgages—almost half of all U.S. mortgages—the narrative changed. The new villains were the unregulated mortgage brokers who allegedly earned enormous fees through a new form of "predatory" lending—by putting unsuspecting home buyers into subprime mortgages when they could have afforded prime mortgages. This idea underlies the Obama administration's proposal for a Consumer Financial Protection Agency. The link to the financial crisis—recently emphasized by President Obama—is that these mortgages would not have been made if regulators had been watching those fly-by-night mortgage brokers.

There was always a problem with this theory. Mortgage brokers had to be able to sell their mortgages to someone. They could only produce what those above them in the distribution chain wanted to buy. In other words, they could only respond to demand, not create it themselves. Who wanted these dicey loans? The data shows that the principal buyers were insured banks, government sponsored enterprises (GSEs) such as Fannie Mae and Freddie Mac, and the FHA—all government agencies or private companies forced to comply with government mandates about mortgage lending. When Fannie and Freddie were finally taken over by the government in 2008, more than 10 million subprime and other weak loans were either on their books or were in mortgage-backed securities they had guaranteed. An additional 4.5 million were guaranteed by the FHA and sold through Ginnie Mae before 2008, and a further 2.5 million loans were made under the rubric of the Community Reinvestment Act (CRA), which required insured banks to provide mortgage credit to home buyers who were at or below 80% of median income. Thus, almost two-thirds of all the bad mortgages in our financial system, many of which are now defaulting at unprecedented rates, were bought by government agencies or required by government regulations.

The role of the FHA is particularly difficult to fit into the narrative that the left has been selling. While it might be argued that Fannie and Freddie and insured banks were profit-seekers because they were shareholder-owned, what can explain the fact that the FHA—a government agency—was guaranteeing the same bad mortgages that the unregulated mortgage brokers were supposedly creating through predatory lending?