10% SAVINGS RATE + CONSUMER SPENDING AT 65% OF GDP = RETAIL DISASTER

[girl gone mad]

10% SAVINGS RATE + CONSUMER SPENDING AT 65% OF GDP = RETAIL DISASTER
http://theburningplatform.com/blog/2010/09/30/10-savings-rate-consumer-spending-at-65-of-gdp-retail-disaster

Now that the Wall Street Journal, New York Times, CNBC and every other mainstream media outlet have figured out what some financial blogs had figured out months ago, everyone knows that the American consumers have not yet begun to deleverage. Consumer credit outstanding peaked at $2.58 trillion in July 2008. It has plummeted all the way to $2.42 trillion today, a 6% reduction over two years. The full $160 billion reduction can be attributed to write-offs by the Wall Street, Ivy League MBA run, banks.



American consumers do not want the Age of Mammon to end. They will need to be dragged kicking and screaming into the Age of Austerity. Consumer expenditures peaked at $10.2 trillion in the 3rd Quarter of 2008. They reduced spending for two quarters, but when Big Daddy Government handed them billions and told them to spend it on cars, appliances, and homes, they dutifully obeyed. Today, consumer expenditures stand at an all-time high of $10.3 trillion, still accounting for 70.5% of GDP. There really has been no hint of austerity by Americans. It is a false storyline. The major reductions in consumption still loom in the future.

The myopic financial “experts” have no sense of history or the concept of reversion to the mean. They didn’t get it with home prices and they don’t get it with consumer expenditures. The country has been on a 30 year drunken binge of debauchery, debt accumulation and delusions of never ending 10% annual home price gains funding a glorious 30 years of retirement on an island in the Caribbean. These visions of a sugar plumb life of leisure are slowly giving way to the nightmare scenario of eating cat food in your very own cardboard box McMansion. The bombastic Boomers are turning 50 years old at a rate of 10,000 per day. A staggering 38% of workers between the ages of 45-54 have less than $10,000 of retirement savings and a mind boggling 29% of workers over 55 have less than ten grand in their retirement savings, according to the Employee Benefit Research Institute. It is no longer a matter of people deciding whether to save, it is a matter of saving or else living in abject poverty in their old age.

http://theburningplatform.com/blog/2010/09/30/10-savings-rate-consumer-spending-at-65-of-gdp-retail-disaster">more...

[hobbit709]

1. My spending has dropped because my income has dropped.

I now make about 40% of what I made a year ago. Add to that the fact that my wife Donna was the primary wage earner until she passed away has really put the hurt on me. I haven't defaulted on any credit cards but I got rid of the high interest ones-that alone saved me over $100/mo just in interest charges. I expect to have the mortgage paid off in Jan or Feb-that will take about $800/mo off the top of my expenses.

[girl gone mad]

2. I'm sorry to hear of your loss.

It sounds like you are making the right financial choices. I've known a few people who let their lives fall apart after a divorce or the death of a loved one.

I think our society needs to focus on ways to get money into the hands of consumers, but also build a model for consumption that's less wasteful than what we've had for the past few decades. It can be done, but it will take good leadership to stand up to the vested interests that are currently holding us down.

[dixiegrrrrl]

3. K&R