Mortgage & Loan: Crashdown

The consumer confidence reports are out today, and everyone is feeling the pain:

The report may signal trouble ahead for consumer spending—and perhaps for the overall economy. Early reports of August retail sales show that shoppers of all stripes are already cutting back, from the lower-income shoppers at Dollar General (DG) to the more affluent who buy their linens and dishes at Williams-Sonoma (WSM).

Since August is generally viewed as a bellwether for shopping trends during the holiday season, these are worrying signs, especially because the holiday sales season is extremely important to retailers. For most retailers, it can account for up to 40% of annual sales and up to 75% of annual profit.

I'm not sure what the Conference Board expected, really. The sense of unease and rising acknowledgement of our lack of upward mobility is affecting everyone from the policy wonks to Joe Sixpack. We're in the middle of two wars, our housing market is in the tank, gas is very much OUT of the tank, and prices for almost every form of consumable item are rising. Angry Bear does a great job of pointing out how the rich get richer, while the rest of us, well, don't.

Wasn't home ownership supposed to be the gateway to riches for 85 percent of Americans? Couldn't we borrow off our equity and spend far beyond our means? Well, we did...in huge numbers, in fact, and as Dean Baker points out, we're reaping the rewards:

The one thing we can say is that the recovery from a housing crash induced recession will not be as easy as a normal recovery. Youl can't just lower interest rates and expect a boom in home construction and car buying. As I've note before, the Fed used the housing bubble to boost the economy out of the recession that resulted from the collapse of stock bubble. It's not clear that it has another potential bubble out there.

What do we do when we run out of assets to inflate, eh? Looks like the economy is going to continue taking flying lessons from Comair for a good long while...

Posted at August 30, 2006 03:21 PM

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The consumer confidence reports are out today, and everyone is feeling the pain: The report may signal trouble ahead for consumer spending—and perhaps for the overall economy. Early reports of August retail sales show that shoppers of all stripes are already cutting back, from the lower-income shoppers at Dollar General (DG) to the more affluent who buy their linens and dishes at Williams-Sonoma (WSM). Since August is generally viewed as a bellwether for shopping trends during the holiday season, these are worrying signs, especially because the holiday sales season is extremely important to retailers. For most retailers, it can account for up to 40% of annual sales and up to 75% of annual profit. I'm not sure what the Conference Board expected, really. The sense of unease and rising acknowledgement of our lack of upward mobility is affecting everyone from the policy wonks to Joe Sixpack. We're in the middle of two wars, our housing market is in the tank, gas is very much OUT of the tank, and prices for almost every form of consumable item are rising. Angry Bear does a great job of pointing out how the rich get richer, while the rest of us, well, don't. Wasn't home ownership supposed to be the gateway to riches for 85 percent of Americans? Couldn't we borrow off our equity and spend far beyond our means? Well, we did...in huge numbers, in fact, and as Dean Baker points out, we're reaping the rewards: The one thing we can say is that the recovery from a housing crash induced recession will not be as easy as a normal recovery. Youl can't just lower interest rates and expect a boom in home construction and car buying. As I've note before, the Fed used the housing bubble to boost the economy out of the recession that resulted from the collapse of stock bubble. It's not clear that it has another potential bubble out there. What do we do when we run out of assets to inflate, eh? Looks like the economy is going to continue taking flying lessons from Comair for a good long while...