Posted on 12/28/2008 10:00:07 PM PST by gpk9
Christmas retail sales are confirming what "gloom-and-doomers" have been saying all year: Consumer demand is falling off a cliff. It's in free-fall. The bottom will eventually be hit, but it won't be a trampoline-bounce back up. It will be death on the rocks.
70% of our economy is consumer demand. When consumer demand dries up, the economy crashes.
Why is consumer demand drying up?
1) Massive consumer short-term unsecured debt.
In the 2002 - 2007 credit bubble, consumers collectively pushed credit card balances over the 14 TRILLION dollar mark.
That massive amount of debt simply cannot be paid off. Credit card companies are realizing this, and have kicked interest rates to dizzying heights, and / or simply turned off many people's credit cards.
2) Massive consumer long-term secured debt.
Consumers have bought more home than they can pay for. That was made possible by insanely-loose lending policies of our government, together with insanely-low interest rates set by the Fed. The result has been a 5-year orgy of home buying, bidding up home prices to insanely-high levels.
The 5-year credit bubble has popped ...as smart people knew it would.
Those insanely-loose lending practices have suddenly vanished, leaving consumers in the frightening position of approaching variable rate jumps with no way to re-finance at lower rates. Unprecedented numbers of people are going to find themselves in mortgage default in the months ahead, leading to an unprecedented number of homes being given back to banks, and a near-collapse of home prices.
Those insanely-low interest rates are dropping even lower, but hardly anyone has credit-worthiness to borrow money due to the massive debt-load they're already carrying, along with home prices dropping like a rock.
On top of that, banks are absolutely TERRIFIED! They have stopped lending money for all practical purposes. Even with TRILLIONS of new dollars created out of thin air by the Fed being handed to them on a silver platter, building their cash reserves to all-time highs, banks are STILL terrified, and STILL not lending money.
The T.E.D. spread is down significantly in recent weeks, but that reflects the rate banks charge to each other. With cash reserves built back up to all-time highs in recent weeks, banks feel more comfortable about lending to each other, but they are STILL NOT lending to consumers and businesses.
3) Unprecedented job losses.
One component of credit-worthiness is job stability. The likelihood of having a job long-term. That likelihood is vanishing as hundreds of thousands of jobs are being liquidated by companies seeing terrifying drops in sales and revenue. The automobile market, a classic indicator of consumer demand, is literally collapsing. New car sales across the board are down 35% in November alone, three months into a new model-year. That is near-collapse of new car sales, and will be the last-straw for the big 3. The end. All 3 of the big three are going into bankruptcy, regardless of $15 billion or $34 billion or however many billions are thrown at them by the Fed.
That same story or something close to it is happening to companies in all sectors of the economy, resulting in hundreds of thousands of more jobs being liquidated in the months ahead.
Even utilities, electric, gas, water, etc are liquidating jobs as revenue drops and dis-connects rocket to record highs in the past three months.
Banks know this. They are keenly aware of it. That is one reason they are terrified and not lending money to consumers.
They're also not lending money to businesses, those same businesses seeing terrifying drops in sales. Aside from the collapse of short-term business financing, bank letters of credit, a critical component in movement of goods and commodities within America and between other countries (like China), are simply not being issued now, resulting in a near freeze-up of large-load shipping within America and worldwide.
If collapsing consumer demand was the only problem, all we would have is a depression, a deep depression.
But collapsing consumer demand isn't the only problem. The value of the dollar is collapsing as well.
The trillions of dollars being created out of thin air by the Fed and being thrown at any and everybody in their terrified attempts to prevent an economic collapse are creating hyperinflation of the money supply at a rate unprecedented in history and leading to a soon-coming monetary collapse.
Other nations see it, are becoming terrified themselves, and are moving swiftly to unload their dollar holdings before the dollar becomes worthless.
On top of that the IMF is now proposing plans to cut the dollar loose as the world reserve currency. Once that happens the dollar is finished. It's over. People will literally start using dollars to wipe their butt. Any dollar-denominated holdings and investments will instantly become near-worthless. 401ks. IRAs. Money market accounts. Bonds. You name it. It will happen almost overnight.
We are going into a hyperinflationary depression the scale of which has never occurred in history. It will be the final undoing of America. The mighty America, bastion of liberty and freedom for 250 years, is coming down to it's knees thanks to insane levels of financial greed, something our forefathers never thought would or could happen.
Other nations are seeing it unfold right before their eyes, the huge beautiful Titanic christened "America" with the gaping financial hole in our side, are absolutely terrified, and are making all haste to cut the lines before we drag them under also.
We have been warned, by credible people in the know, one of them being our new vice-president, of a major calamity hitting America in the first few days of Obama's presidency, but no one, not even those making said warning, are saying what it is.
They undoubtedly know what it is because they are giving exact dates.
In a larger sense, '09 is going to be year the Titanic-christened-America sank. Our government-captain and officers are watching their nation-ship sink beneath their feet as they encourage the band to keep playing.
As with the real Titanic, there aren't enough lifeboats to go around.
As with the real Titanic, only the elite will be in them.
Unlike the real Titanic, the captain and officers will be in the lifeboats too, watching along with their elite friends in morbid silence as the rest of us freeze to death in the frigid waters of financial ruin, or go down locked deep in the bowels of the ship as they take one last look at the keys, then toss them overboard.
It's not a perfect analogy. America won't cease to exist. Something will rise out of the depths eventually.
But it very likely won't be America any longer. Maybe in form, but certainly not in substance.
Barney Frank denies any involvement or blame.
It really doesn’t matter what the actual number is.
It really doesn’t matter what any of us think.
What matters is what other people around the world think of us.
They don’t care what the actual numbers are either. They’re not looking at actual numbers. They’re looking at trends. The trends they see in America, and the pace of those trends, frighten them to one degree or another.
If they decide to cut us loose, they won’t care what we think.
This essay doesn’t matter either. Nobody cares what I or any other individual here thinks. What we think doesn’t matter.
That’s the whole point. Our opinions don’t matter. Every opinion expressed on this site doesn’t matter.
Reality is what matters.
If I have inaccurately described reality, it doesn’t matter because reality doesn’t care what I or anyone else thinks. If I have accurately described reality, it doesn’t matter because reality doesn’t care what I or anyone else thinks.
All these doom and gloom false articles are pissing me off.
Americans don't save and never will so whatever they can spend they will. Consumer credit is flowing freely and is not being cut off to credit worthy people.
The people who shouldn't have any credit are being cut off but not 95% of the consumers.
Local Banks and credit unions are lending like they were a year ago so they aren't under duress because they didn't do sub-prime lending !
The sky isn't falling and for 90% of us it's business as usual !
Are you still breathing? Have a beer and chill. Hasn’t anybody ever told you that money and life are not the same thing?
???
Cheers!
And the politicians (demoncrats) taxing, taxing, taxing while they play, dine, and wine themselfes. Then like the idiots they are they tell the rich they will tax them even more.
Does the above make you want to disagree. You can you know, after all the companies holding the balance on you credit cards are holding worthless paper. It's legal to think about it. Then tell them once and for all how foolish they have been. (And yes we are foolish too for allowing this to happen.)
Our service economy is much less vulnerable to economic collapse than the junk economy of China. We have been buying a lot of stuff not related to our basic needs. We can stop buying this stuff and be no worse off. The Chinese on the other hand will be devastated. That in itself is probably the greatest threat to America and the rest of the world.
Of course it matters. The truth always matters. Your post is filled with misinformation, hyperbole and alarmism. Why did you even bother? Total consumer debt is around $2.6 trillion, not the $14 trillion you indicate in your post. Wherever do you get your numbers? If you're that far off on this one piece of data why should anyone pay any attention to anything else you've written? Again, why even bother to waste your time (and mine)? Does doom love and need company that badly?
That's funny.
Reality is what matters.
Make up your mind. LOL!
If I have inaccurately described reality
You have, like you usually do.
Logic doesn’t matter, we’re doomed!!!!!!
When the government declares war on economic growth, the economy crashes. The Fed incorrectly blames inflation on economic growth, so every ten years or so it inverts the yield curve, which chokes off funding for business. An inverted yield curve is the best predictor for recession there is. Combine that with a president who is an economic moron, and we find ourselves in a mess.
If the government corrected itself with stimulus for business (especially small business), instead of for the consumer (which has already failed a few times), this financial crisis would be over shortly at minimal cost.
But I'll guarantee it doesn't happen, because demand side stimulus, and infrastructure projects are what benefits politicians the most, not America.
Because your posts are funny.
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