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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory
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To: kris b who wrote (75902)12/18/2006 7:22:53 AM
From: GST  Read Replies (1) of 110194
 
Excellent questions: Now put them in global context.

<1. Who is the engine of the US economy (according to the latest stats households/consumers account for 90% of the economy if you include housing)? If it is not the consumer who else has the buying power of the same magnitude/size?>

Demand growth will slide in the US and grow outside the US.

<2. If it is a consumer, does the consumer have the financial means/borrowing power to accelerate the consumption of goods and services from here or not?>

Asia is a largely cash economy -- we are at the dawn of their days as consumers.

<3. If it doesn't how can consumer obtain new/money-buying power? >

American buying power in global terms has peaked.

<4. Liquidating assets like bonds; stocks doesn’t constitute new money.>

America is socialism for the rich. Washington will look after its rich patrons.

<5. New money/buying power is higher wages and/or new borrowings (where is the new asset bubble that HOUSEHOLDS can monetize to fuel their consumption. It should be at least the size of the receding housing bubble, otherwise there is not net addition of funds to the Ponzi unit)>

The next generation now coming out of good universities who have something to offer in a 'knowledge economy' are making money -- lots and lots of it. Less skilled workers will 'enjoy' a standard of living that keeps foodbanks in business for decades to come. We are becoming a global society of rich and poor, and Americans will see a rising tide of poor here and a rising tide of rich elsewhere -- education will increasingly make the difference. Some institutions of higher learning will be embarrassed to admit the true cost of admission and will use back door methods like foundation contributions from rich families and entrance lotteries for the best and the brightest who don't have the money to pay half a million in tuition -- this will keep people from asking too many questions.

Joe 6 pack as he is known here will never see his consumption grow again. He is done. He will be lucky to survive the transition to global consumption amidst American debt.

The US is in Beijing now begging China to help the US devalue the dollar and light a fire under Chinese consumers -- and the indeed the fire has been lit. Now it is a matter of fueling the fire and that is what Wizards do best.

With all due respect, anybody who sits around watching the US Fed and thinking primarily in terms of US consumers is going to be blindsided by new global patterns and trends and global actors. You wouldn't talk about the oil industry in purely domestic terms, but you would presume to do so for the most global of all commodities -- the US dollar.
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