This means the housing prices are not likely to recover - not in the boomer‚Äôs lifetime. That was a once-a-century bubble and it has blown up.
Bloomberg reports that retails sales fell 2.1% in September – the biggest decrease this year. Know what that means? It means the “Age of Thrift” is here… that consumers really are cutting back ‚Äì and we Amelia Island boomers are screwed.
It means that the consumer economy is not going to return to robust growth anytime soon. And it means, too, that people will find it hard to find jobs for a very long time. Another thing it means is that housing prices are not likely to recover – not in the boomer‚Äôs lifetime. That was a once-a-century bubble and it has blown up.
Mortgage lenders say they expect the peak in foreclosures to come about a year from now. As for the bottom of price declines, you can expect that in 2013 or beyond. A housing bubble typically takes prices down for six years, says a study by professors Reinhart and Rogoff.¬† But this was not a typical bubble; it was an extraordinary bubble. It seems logical that the correction will be extraordinarily deep and long too.
It also means that this stock market rally is very vulnerable. The stock market and the economy seem to be reading different newspapers!
It is a curious fact that consumer spending as a percentage of the GDP, had increased; but it only increased because the other parts of the GDP – notably business spending and investment – fell off even faster.
With output falling… sales falling… and investment (in new plant and equipment) falling even faster… who is going to hire new workers? Not many companies, and which companies are going to invest in young workers? Who will have to be trained? Sometimes training requires many years to become productive. Yep, they are screwed too.
“Baby boomers working longer hours, for less,” says a Financial Times headline. What do you expect? Their currency is going down in value. Their customers are disappearing. Their retirement savings disappeared with housing prices. They can’t even borrow money anymore.
Now that lenders have started to respond to their record-high delinquency rates by rationing credit, a mad scramble for cash is occurring to replace the loans – food stamp usage is up 22% year-over-year, pawn shop business is up nearly 40%, and there is a tidal wave of applications for Social Security disability benefits that are not explained alone by workplace mishaps.
Boomers have no choice. They need money. So they work harder, and longer yet they get paid less. Why? Because prices are falling, even the price of labor. The U.S. is a country out of control folks. Be careful, very careful.