“This is not a fluke or a technical quirk. It’s fundamental. Real disposable income has been squeezed.” -- John E. Silvia, Washovia Chief Economist, Charlotte, NC.
The context is a New York Times article about how low consumer spending is taking a toll on the economy:
With the overall economy growing at a mere 0.6 percent annual rate for the second quarter in a row, consumer spending advanced by only 1 percent, the government estimated. That was down sharply from the 2.9 percent gain for all of 2007 and the 3.1 percent gain for 2006. It was the weakest showing since 2001, the last time the economy was ensnared in a recession.
Even more ominously, Americans cut back on a wide variety of discretionary purchases, conserving their cash for necessary spending.
In the dip, economists saw evidence that the basic laws of arithmetic are now impinging on millions of households.
As real estate prices plunge, so does the ability of homeowners to borrow against the value of their homes, crimping a major artery of spending. As banks grow tighter with their dollars in a period of uncertainty, families are running up against credit limits, forcing many to live within their incomes. And as companies lay off employees and cut working hours, paychecks are effectively shrinking.
And yet this guy, from a company that's being investigated by Federal prosecutors for laundering drug money, whose telemarketers stole money from depositors' accounts, and that's awash in litigation related to the subprime debacle, who's referring to the home equity that fueled most of the spending binge of the last decade as "disposable income."
It's no wonder we're so completely fucked, and no wonder a check for a few hundred dollars and a temporary lifting of the Federal gas tax are being sold as the panacea for a collapsing economy.
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