Whipping a Dead Horse

Pretty hilarious. The NYTimes on hopes that the American consumer will bounce back. Look, without improvements in income for three decades (due to the iron triangle of Fed "inflation targeting, government bias towards capital markets, and corporate greed), it was only a matter of time before consumers keeled over from exhaustion. You can't whip a dead horse to life.

The buyer of last resort and the engine of the entire global economy, particularly the Asian mercantilists, is dead due to debt exhaustion.

From China Business:

Households first need to decrease leverage if they’re going to take out further debt. The total wealth in the world may have declined (note: already) by USD 15 trillion. A similar amount could be lost in the next 12 months. It is not possible to get consumers spending again with wealth destruction of such magnitude (note: good luck with that).

The thing is, that with the loss of that much notional wealth, a psychological shift occurs (and all economics is, at root, psychology). People radically change behavior. They hoard. At that point, a recession turns into a depression.

Comments

[Tangurena]

If the fed wants consumers to open up their wallets, then a far more useful "bailout" would be to mail households credit cards. And I suppose to make people use them, make the cards a "use it or lose it" proposition.