Our discussion of Credit Card usage leads us review this:
Since 2000, American households have spent more than they earned – a shift from
the prior 3 decades. Q3 2005 household spending was a record $531 billion more
than their after-tax earnings (annualized). Consumer spending was 76% of Q3 GDP
– a record high, up from 73% in 2000.
Home Equity Cash Outs; Bank Mortgage assets as a % of total assets
Source: NYT
Residential real estate is a record 204 percent of
disposable personal income, compared with 150 percent in 2000.
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Quote of the Day:
“If all the economists in the world were laid end to end
they still wouldn’t reach a conclusion.”
– George Bernard Shaw
Oh well, they can all sell their expensive homes and move down or out. But who will they sell them to? I guess the Fed will just have to continue blowing.
An interesting blog entry would be about historical trends when housing takes a nose-dive, which kind of companies win?
Barry? Anyone?
yes, when will the adjustment happen?,
anybody know?
Consumer spending is driving this economy, and all their sources of credit has dried up. Every credit card maxed out and 3 mortgages on the same house, with the money all spent on chinese made trinkets. Then add stagnant wages and a low level of job growth.
So what now? With no more credit one would expect stocks to collapse…..?
But then again, most U.S. companies are now global companies deriving a good % of their bottom line from overseas markets. More overseas profits equal more share buybacks equals stronger stocks. Then we also have the collosal amounts of petro-dollars looking for a safe nest to roost.
We could be in the cusp of the biggest conundrum of all, a weak internal U.S. economy but a U.S. stock market that slowly trends up. If the Chinese were smarter, they would clean up their corrupt equity markets, fully privatize all the national corporations and allow a free flow of foreign capital into their stock market.
Consumer spending is driving this economy, and all their sources of credit has dried up. Every credit card maxed out and 3 mortgages on the same house, with the money all spent on chinese made trinkets. Then add stagnant wages and a low level of job growth.
So what now? With no more credit one would expect stocks to collapse…..?
But then again, most U.S. companies are now global companies deriving a good % of their bottom line from overseas markets. More overseas profits equal more share buybacks equals stronger stocks. Then we also have the collosal amounts of petro-dollars looking for a safe nest to roost.
We could be in the cusp of the biggest conundrum of all, a weak internal U.S. economy but a U.S. stock market that slowly trends up. If the Chinese were smarter, they would clean up their corrupt equity markets, fully privatize all the national corporations and allow a free flow of foreign capital into their stock market.
how did you get consumer spending % GDP is 76%? I use the BEA data and it was only 70%
From the NYT article, citing Paul Kasriel of Northern Trust: