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Many economists have been mystified that even though the recession is “over”, American consumers have not opened their wallets and started spending again like they normally do at the end of a recession. News report after news report has encouraged Americans to grab their credit cards and to head out to the stores and start spending again, but it just is not happening.
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So why are things different this time? Well, for one thing there is a lot of fear in the air. Poll after poll after poll shows that faith in the economy has collapsed and that large numbers of Americans fear that things are going to get even worse for the economy soon. But for millions of other Americans there is another problem – they couldn’t spend more money if they wanted to.
The truth is that living on credit for decades has caught up with us as a nation. Americans are absolutely drowning in mortgage debt, car loans, credit card debt and student loan debt. As wages have stagnated, credit has enabled many of us to pursue the American Dream and to live far beyond our means, but that doesn’t last forever. Now tens of millions of Americans are completely and totally tapped out. But without the return of the voracious American “consumer” there is not going to be a full economic “recovery”.
For decades, the American consumer has always returned with a vengeance. Continually expanding debt loads have fuelled a level of prosperity that most of humanity only dreams of. But unfortunately, no debt bubble lasts forever.
Now the consumer debt bubble in America has started to pop, and many are wondering what is going to fuel the U.S. economy if American consumers are unwilling or unable to do it any longer.
The truth is that a very large percentage of Americans consumers is either incredibly scared or totally broke or both. Many economists and politicians are desperately hoping that we can crank up the consumer debt spiral one more time, but tens of millions of Americans are already in debt up to their eyeballs. The reality is that you just can’t squeeze blood out of a rock.
But that doesn’t mean that the politicians running for office in November won’t try to convince us that this thing can be fixed if we will just elect them and their buddies. We will be told that the right combination of tax cuts and/or government spending programs will get us on the right track.
Sadly, though, the U.S. government and our state and local governments are all drowning in debt too. There is not much more they can do for the economy. Even the Federal Reserve is about out of ammunition at this point.
The truth is that the U.S. economy is a dead horse and it just does not want to get up and start running once again. You can only push a debt bubble so far, and it looks like we may have reached our limit.