Wall Street killed the consumer but wants him to spend more. It can’t work. It won’t wash. We have a demand recession coming, not a supply recession. As Maria Bartiromo has been warning, there is no end demand. This is a credit/demand recession. No amount of supply side BS coming from Luskin, Kudlow, and Fiorina will do anything to help the consumer.
Here are the ways that Wall Street is killing the consumer:
1. The consumer was fooled into investing in the speculative dot com bubble. It burst and Wall Street profited while main street lost a lot of money.
2. The consumer was fooled into believing real estate always goes up by a media bought and paid for by Wall Street. The consumer lost massively, either by suffering paper losses or by actually being imprisoned in debt. Wall Street recovered, and a supply side boom among business ensued, which is artificial and not based upon end demand.
3. The consumer is now getting hurt by the lack of lending available, but part of that is because there is no demand for loans. And Americans don’t need easy money loans, even though the Republicans are opposed to letting borrowers have information that would protect them from toxic lending! The Republicans are furious about this. They hate letting poor or lower middle class people know any more about how bad the loans are that they want!
4. The consumer is getting hurt by current speculation in oil, in aluminium (thanks, Goldman Sachs!), and in food. Speculation does nothing for demand, and in fact destroys demand. Speculation is like a curse on our nation.
5. Wall Street is pushing for massive cuts in programs that give people money to spend. So after these cuts are implemented, there will probably be less spending, as unemployment insurance is not extended, as the health care cabal keeps squeezing these consumers and as house prices are not permitted to crash. Everything Wall Street is doing is defeating main street. And yet main street is end demand. It makes absolutely no sense.
It is clear to me that the Tea Party folks, Eric Cantor foremost, are being backed by the hedge funds. They want a new housing bubble. I am confident that I have shown the Republican jobs program will be a housing bubble. That is why the Republicans, or at least the hedge fund faction, want the economy brought down. It will force the Fed to act. It will force a repeal of Dodd-Frank, and actually allow massive easy money to put main street at more risk. Then when main street cannot pay the loans back they will be blamed. But let’s not be fooled, because we know the process and we know who to blame, the Fed and the powers of finance. The game will likely be played before 2020. The bubble will be only for as long as Americans are unaware. Once they catch wind of it, people will fear.
People will be able to buy homes with a promise, and they will not be able to pay the loans back. Here is how bad it is. Houses are being sold in Reno, NV. for 120-180 thousand dollars, that have a replacement cost in excess of 300 Thousand Dollars! You got that people? This is happening all around the United States. It is time that main street be rescued. We need big infrastructure projects. We don’t need QE but we need some mechanism to get money into the hands of everyone else besides Wall Street! It will ultimately filter through to Wall Street, as end demand picks up.
Or we can just keep going along letting Goldman Sachs warehouse aluminium in Detroit for customers, while these customers think that aluminium will go sky high. Even Coke and Pepsi are made crazy by that behaviour. And we can let companies continue to bid up commodities without taking delivery of anything, and continue to weaken main street.
Yep, eventually it will cost 400 thousand dollars to insure the rebuild of a house that is worth 200k, and all because:
1. people are not paid enough to buy the house at even the discounted price and
2. the commodities used to build them keep going up.
If it weren’t for a bunch of retired escapees from California and a large medical profession and lawyers up the ying yang, I don’t know how houses would sell in Reno at all!
For main street, things are out of whack. The numbers don’t add up. And Wall Street is the prime reason along with a medical profession that has a virtual monopoly on pricing. Democrats played the first bubble game, but they want, at least, some sanity with Dodd-Frank. Will they win? I doubt it.
Americans would rather overdose on the crack cocaine of Wall Street’s easy money than have real wage increases with real reductions in the artificially elevated cost of living. Or perhaps they know that those wages will never materialise.
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