Tuesday, May 5, 2009
You can’t go home again
The entire world economy rests on the consumer; if he ever stops spending money he doesn't have on things he doesn't need -- we're done for.
- Bill Bonner
Wow! The stock market has rebounded to 2009 levels! Home sales have increased 1.3%! Consumer confidence is up! Green Shoots, motherfuckers, Green Shoots!
Goodness, we are desperate to get back to where we were; using our homes as ATM’s to subsidize our credit jones, anesthetized by a scandalously successful stock market, driving those completely retarded* Hummers. Let’s get real. Even when the economy recovers, it is going to be at lower levels of employment with lower levels of credit, the same low wages that drove us to credit in the first place, more expensive resources and an insurmountable new tax burden. The orgy of wealth creation we’ve been experiencing (from a distance mind you, only 2% of us actually got any richer) was based on a big fat irretrievable lie.
Our houses weren’t worth what we paid or what the bank would give us; prices were driven up by easy (stupid, fraudulent) credit. We couldn’t afford a 25K credit line when we had no job (this is me and MBNA I’m talking about). Without our home equity and credit cards, there is woefully insufficient fuel for the growth economy. Also 2 billion really angry chinese people.
Wall Street’s “success” came from finding a new (and completely unsustainable) way to re-sell debt. We totally lost that bet. The $6 trillion in stimulus/loans/investments we’ve thrown at this problem will never come back to us except in the form of inflation and higher taxes.
The US auto industry will never be what it was (which is kind of sad but kind of cool, too). We have no credit to buy cars, even if they made good ones. Silly rabbit, let’s not even pretend we’ll have actual dollars to buy anything.
With no automobile industry and no commodities economy (abandoned that ship 30 years ago) we are left with a growing class of permanently unemployable people…now with NOT just brown people…and unemployed people don’t buy stuff.
All the economy has to do is pick up a little and fuel prices are going to go through the roof. (Some people theorize it was the pressure of high fuel costs in 2008 that brought about the collapse of the housing bubble). The energy oligarchs haven’t been investing in new extraction since the prices have fallen so depletion curves have shifted and once the inventories are run down (or not, the oil companies seem to do whatever the fuck they want for no particular reason), look out for the bitch slap happy motorists!
Between the debt of federal, state & local governments, private households, business and domestic financial sectors, including federal debt to trust funds (social security) we owe $57 trillion. That’s $186,000 person. That is 500% of GDP. That’s twice the debt level we had in 1957. 79% of that debt took only 19 years to create. It’s getting worse every day.
So, we have high unemployment, low to no credit available to business and consumers, high fuel costs and ever increasing interest payments on our debt IN RECOVERY. They are right when they say our lifestyle is not negotiable because it’s over.
You can’t go home again.
*I use this word to describe voluntarily retarded behavior. I intend no disparagement against folks with Down’s syndrome. I’m not an asshole.
As I was saying…