"Worst Is Yet to Come:" Americans' Standard of Living Permanently Changed

[katty]

more:
http://finance.yahoo.com/tech-ticker/article/176478/%22Worst-Is-Yet-to-Come%3A%22-Americans-Standard-of-Living-Permanently-Changed

"Worst Is Yet to Come:" Americans' Standard of Living Permanently Changed

Posted Feb 17, 2009 12:53pm EST by Aaron Task in Investing, Recession

There's no question the American consumer is hurting in the face of a burst housing bubble, financial market meltdown and rising unemployment.
But "the worst is yet to come," according to Howard Davidowitz, chairman of Davidowitz & Associates, who believes American's standard of living is undergoing a "permanent change" - and not for the better as a result of:

An $8 trillion negative wealth effect from declining home values.
A $10 trillion negative wealth effect from weakened capital markets.
A $14 trillion consumer debt load amid "exploding unemployment", leading to "exploding bankruptcies."
"The average American used to be able to borrow to buy a home, send their kids to a good school buy a car," Davidowitz says. "A lot of that is gone."

[DJ13]

1. Our standard of living has been declining for 20+ years

Thats why so many people turned to debt to make up the difference.

[katty]

3. it certainly has been on the slippery slope

[OwnedByFerrets]

8. Bingo!!

[The Wizard]

16. It's been declining since 73

when there was an OPEC oil embargo. The last two years of Bill Clinton's presidency was the first time since 73 that the working class got a raise in real dollars that outpaced inflation.
The Bush cartel couldn't have that. Imaging working people in a position to challenge the ruling class.

[Alcibiades]

20. I had thought it was 1979

That was the year that income for men with high school diplomas peaked. It's gone down every year since. Women's income has gone up, but mainly because they are working more hours.

I also like the 1979 date because it puts the onus where it belongs: not on OPEC, but Reagan.

[The Wizard]

22. Carter was in office in 79

and we also had gas rationing.
It's always about oil. Monitor the price of gasoline two months before a major election.
When OPEC realized we weren't committed to the Vietnam occupation/war in 73(we pulled out our combat troops)OPEC knew we couldn't use Vietnam's perceived oil reserves as leverage. When it became apparent Vietnam's oil reserves were far short of the original speculation, our military presence and the will to continue evaporated.
I lost the best job I ever had in 74 because of the oil shortage. Check unemployment statistics for 1974. With high unemployment employers have a major bargaining chip as the demand for jobs increases there's a ratio of inverse proportion as to what is paid for available labor.

[Alcibiades]

25. I know Carter was in charge in 1979

And Reagan, of course, wasn't inaugurated until 1981, but the claim here is that most of this trend has taken place under Reagan and subsequent Republicans. The fact that 1979 was the peak and Carter was in charge of the executive is not inconsistent with what I'm claiming: for workers in the bottom half of the earnings distribution, it's been downhill since the end of the Carter presidency. 1979 is often cited as a watershed year in the literature on income inequality.

Many factors have helped the decline in real wages for most earners since the 1970's: globalization, offshoring, tariff cuts, and a systematic effort to crush the trade union movement in the US and internationally. Unemployment has mattered, but the trend toward exploiting working folks at a greater rate has been so remarkable over the last thirty years that there have been several periods where unemployment has gone down AND wages have also stagnated, contrary to all standard economic expectations.

It is true that high oil prices -> recession -> high unemployment -> low wages. We're just looking at different points of reference: 1979 was the point when wages reached the peak from which they have been declining ever since, but the oil price shocks of the early 1970's was the point at which wage growth began to slow.

[Taverner]

2. Expect to see less imports of all stripes

Inflation will continue, while wages will stagnate or go down

Also expect to see the megastores (Target, Walmart, etc) who rely on selling cheap imports to start scaling down or closing their doors.

On the other hand, if the stimulus works, it will work quickly. You should see a bounce in the first year.

[tonycinla]

14. Really!!

Where i live,central Florida,we are experiencing deflation not inflation.It is true that gasoline is slowing rising and food prices are about stagnate compared to two months ago,but you can get all kinds of deals.But home prices,rents,salaries that business owners pay for new help,real estate taxes ,many services provided by small businesses are actually less now than 4 months ago.Many professionals,doctors,dentists etc in this area will reduce their fees if you ask .Almost anything is negotiable.Motels on the beach will give you a di scouted ,compared to last year,if you inquire.In a few years or sooner it is possible that inflation could come roaring back but now here in Florida it is more like deflation including wages.

[PDJane]

4. The consumer is not the one at fault for this crisis.

The democrats are not at fault for this crisis.

This is the difficulty when a system concentrates on moving wealth to the top; the edifice collapses on itself. This is the final result of things like continual tax cuts and severe underfunding of necessities.

For starters, education, pensions, health care and infrastructure are necessities of a civilized life. The standard of living for the average person down there has been declining since the conservative idol, Ronald Reagan, was elected. Since then, wages have stagnated and the US has borrowed itself into a massive hole for military expansionism and futuristic pipe dreams.

This man has his figures right; his reasoning is wrong.

[LastLiberal in PalmSprings]

15. Reagan's "Government is not the solution, government is the problem"

sounded so clever and simple that people started to believe it unquestionably. Of course, it didn't hurt that Reagan looked and sounded like the ultimate "father" who would take care of us.

Thus began the dismantling of the social safety net (mental hospital patients dumped on the streets), the infrastructure (bridges collapsing) and education (public colleges are so expensive that not everyone who wants to pursue a degree will be able to afford it).

All the while the sheeple are repeating the mantra, "Government is not the solution, government is the problem." And now they are shocked to discover how screwed they are. Clearly, it is the result of too much regulation -- all would be well if the government would just get out of the way and let the free market run rampant. Critical thinking is no longer valued, lest one be considered an "elite."

I wonder who's going to win "American Idol"?

[DUlover2909]

18. I think rising healthcare costs are at the root of our economic problems.

There is a price to be paid for longer expected life-spans. Insurance companies today are appauled at the idea of having to pay for treatments that were not available a few decades ago. Back then, if you got really sick with something, you just died. Back then, they made money insuring people because for many ailments there were no treatments. Now these companies are expected to pay out huge sums to cover the costs of treatments that they could never have anticipated. They still want to make money for their shareholders so they jack up the prices for coverage. That turns into larger costs for employers, and hence higher prices for their products. Higher prices and stagnant wages means less money for consumer spending. It's a very tricky problem. I don't propose to have an answer.

[PDJane]

24. Single payer health care.

And for the 2.8 trillion that Americans pay for health care every year, you could have one hell of a system that covers everyone.

The problem is a for-profit medical system. It's inefficient. By definition, it makes a lot of money on the misery of the populace, it's elitist, and it means that 1/3 of the money spent goes for paperwork. It means that people who have no idea what they're doing and who don't care for the patient make decisions. It means that malpractice insurance is heavily inflated, because it has to cover life-long health costs for a person who will never be able to get insurance again.

The other half of the equation is that taxation is not fully progressive and it rewards bad behaviour.

Of course, nationalizing the fed would go some way to fixing the problem, too.

[Peregrine Took]

5. Ole Howard is dumping on Pelosi and Carter but nary a word against the

Bushes or Reagan.

[southernyankeebelle]

6. Wham thank you man

You didn't have to tell the people that live in the lower middle class and working poor. We have known ever since Reagan came in office. Its taken the upper middle class to finally realize what has been going on. But just like the upper middle class and the very wealthy they didn't care because it didn't effect them. The rest of us don't have much farther to fall. But I feel for the upper middle class family with kids because they have never known what it is to go without.

[FatDave]

11. Well, I've known what it is to go without.

It's just that there was a blip there, a couple years where I made around 85,000, where I thought I could actually make something of my life. Well, good thing that didn't last. I might've gotten cocky.

[FiveGoodMen]

7. It's all because there's no soil to grow food

Wait, that's not true...

It's all because we're out of oil.

Wait, we will be someday, but that doesn't explain our current problem.

It's because there's no one around to do any of the needed work.

No, that's not it, either.

It's because there are no raw materials around to make things out of.

Nope, still wrong.

Ask yourself: What did we have before the collapse that we don't have now.

Money. That's it. We have the people, the land, the raw materials, even the know-how.

We just don't have the money. Because it all burned up and we can't make any more.

No...

Because someone took it all and we haven't got the sense or the guts to take it back.

There. Finally. That's what it is.

[wolfgangmo]

10. Bam - Yes

That is it exactly. My company hasn't changed and neither has any of the other companies I deal with.

We still have what it takes.

It's time for the economy to go underground. It is time to start trading for food and services and goods. We already do it at our company .

It's up to us.

[GiveMeFreedom]

12. Here! Here! Well said Sir. n/t

[OwnedByFerrets]

9. We are no longer manufacturers, we are assemblers....at best.

[GiveMeFreedom]

13. True, but,

We have become a nation of debters and that's how capitalism works best. Enslave the working class to a rich few who rule on high with compounded interest.

[wuvuj]

21. You forgot the...

...military, police and surveillance needed to keep the debtors in line?

[bertman]

17. Seems not-so-great for the peoples right now. But sure might help the planet in the

long run.

We been consuming waaay too much and thinking way too little.

Too bad it's gonna be bitter medicine.

[depakid]

19. "send their kids to a good school"

Seeing the support that Americans have had for public education over the past 20+ years, it's difficult to see how or why people think they DESERVE to send their kids to a good school.

That likely goes double for Mr. Davidowitz.

[Tyler Generation]

23. Who the hell "sends their kids to school" anyway?

Everyone I know gets a loan and goes to school. Who the hell pays their kid's tuition? Even the well-to-do types I know get loans.