From John Robb's Global Guerrillas:
Here's a contrarian view on why economic recovery isn't in the cards. Unlike the last Century's experience, the American "consumer" is broken (this isn't reflected in the vast bulk of economic modeling/projections). How broken? The best exploration of this that I've found is from Elizabeth Warren (here's a video of her presentation on the topic before the crisis, worth watching in its entirety). The top line is that the American consumer, prior to the financial crisis, was already fragile due to:
- Stagnant incomes. Median per capita income has stagnated for 30 years and is now headed lower. The only increase in household income came from adding the income of a spouse (that typically gets less than the male income earner). The value generated by mighty productivity increases over the last thirty years was routed to the financial markets (aka casinos) and not shared with American workers.
- Increased fixed expenses. The costs and amount spent on variable consumption have fallen (clothing, food, autos, etc.) over the last thirty years -- which puts the lie to the "over consumption" charge. Instead, the median cost of housing, health, and the costs of work (childcare, two cars, etc. brought on due to a need for sending two people to work) have skyrocketed with very little improvement in the quantity or value of the goods/services received.
- The entry ticket to the middle class has skyrocketed. This is due to the costs of education. Instead of publicly subsidized education (k-12 used to be sufficient for entry), we now have 6 years (pre-school and college) that are directly charged to the American family. Those costs have ballooned into budget breakers...
Read the rest for Robb's conclusions regarding the source of 70% of America's GDP.
"Fugly" doesn't begin to cover how the next five years will play out.