I've been somewhat perplexed by how well consumer spending has held up, at least on a relative basis, given that 1) "underemployment" is above 20 percent and the number of long-term employed is at a record; 2) income has not kept pace with consumption; and, 3) the housing industry is nowhere near a recovery (and the foreclosures just keep on coming).
No doubt the government has played an important role in underpinning demand, especially through its emergency unemployment benefits programs and certain other stimulus efforts. But that didn't seem to explain matters fully.
Then I read the following post, "How Obama's 'Extend & Pretend' Mortgage Policy Explains The Apparent Disconnect Between Housing And The Consumer," at Business Insider's The Money Game (citing the excellent HousingWire blog) and, suddenly, it all made sense. The reason why no small number of Americans can afford to keep on spending is because they've got one less (big) bill to pay:
Our screens are filled with signals that the economy is recovering, and yet one area where there's no discernable improvement is housing. At best the bleeding has stopped. At worst there's plenty of room to fall.
This should stand in sharp contravention with news that the consumer is coming back, especially given the conventional wisdom that the home is (or was, anyway) the ultimate ATM, and that it was the so-called housing wealth effect that fueled years and years of American spending.
Paul Jackson at HousingWire reckons that what we're seeing is the twisted result of Obama's mortgage schemes. Basically, scads of troubled Americans are living in their homes, waiting for some type of modification, not paying their mortgages, and thus freeing up an unusual amount to spend on stuff.