hardmanb

Will Consumers Ever Revert to Pre-Recession Spending Levels?

Economists must realize that there will not be any recovery (to the previous consumer-spending-depe... because it was fueled by credit, unsustainable spending, and unrestrained materialism.

We can't ever go back to the previous economy because it was 71% driven by consumer spending, supported by unwise and ridiculously loose credit card spending, constant refinancing of equity in homes, and bubble-expectations of perpetual rises in home values.

That is over. People know now that home values also drop. Banks, paying off 10%+ credit card defaults, will never to back to the prolific credit card practices of the past. The real estate crash has put an end to no-doc, nothing down, option-pay mortages; teaser-reset rates, and balloon notes for normal folks. People will not be able to maintain the former rate of GDP support of consumer spending, even if they want to. We are going back to good credit records and 20% down to by that house. People will have to take years to save up that down payment.

People (including the children) have personally and vicariously experienced the incredible pain of defaults, foreclosures, homelessness, collapse of investment and retirement accounts, permanent loss of jobs and careers. The lessons are being learned and the lessons will be generational.

Spending less is inevitable. In addition, thrift and savings are rising and will continue. Get used to it, and adjust.