IT GETS WORSE ... U.S. CONSUMERS ARE TAPPED OUT

Since the 1970s American consumers pursuing the American Dream have found an increasingly rough line to hoe. Inflation, declining and stagnant wages, and the challenges of every day life have not been kind to the American consumer. So, how have American consumers coped with growing costs and stagnant wages over the past 35 years? Let’s take a look …

* CHANGING DEMOGRAPHICS, 1970s: With the women’s movement came the rise of two income households. Two working parents increased household income significantly.

* CHARGE IT, 1980s: We began racking up some serious personal debt when, as Alan Greenspan put it, “innovation and deregulation” worked to “expand credit availability to virtually all income classes.” 

* DECLINE OF LEISURE, 1990s: While divorce and personal debt put a dent in disposable income, Americans began working more hours and even surpassed the Japanese in 1995.

By the time George Bush entered the White House the pursuit of the American Dream was becomingly increasingly that … a dream. To keep the pursuit alive Americans began using their homes as ATMs and went on a refinancing binge. This bloated personal debt loads across the country, and helps explain why home owner equity was less in 2005 (at the height of the housing boom) than seven years earlier.

Now that the refinancing boom has been stalled by plummeting housing prices Americans have found another source of cash. Incredibly, though not surprisingly, more and more Americans are tapping into retirement funds to keep up with expenses.

Let’s recap. To keep consumption up we have seen the rise of two income households ... deregulation and “innovative” credit programs ... more hours at work ... a refinancing binge ... increased personal debt loads ... and retirement fund raids.

Does any of this spell "American Dream"?

And did I mention that personal savings in America are effectively at zero?

My friends, American consumers are tapped out of money, and options. Because of this, Bernanke’s Fed rate cuts and President Bush’s economic “stimulus” plan are little more than smoke & mirrors. The American economy is in deep trouble. The best President Bush can hope for is to kick the coming economic debaclypse into the next administration.

- Mark

NEXT POST: I will provide an overview of the reasons why personal bankruptcies are on pace to set national records … again.