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Thread: chart of the week - Personal Consumer Spending

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    Default chart of the week - Personal Consumer Spending

    with thanks to ...





    (snip)"Next at bat is simply an update of a chart we’ve shown you in the past, just more dramatic in its current message than has been the case for some time now. And so housing doesn’t affect consumer spending (PCE – personal consumption expenditures)? Better think again. The correlation here is so high, even we have a hard time believing it’s this significant. It’s just a good thing that factual information leaves hope and personal opinion in a ditch by the side of the road."(snip)

    from


    I believe that the author's point is that, historically speaking, every time that the NAHB housing index has turned down significantly in the past (i.e. '91, '96, '01), it has been followed within a couple of quarters by a corresponding downturn in personal consumption expenditures and thus a recession (of variable severity). However, this time around, personal consumption expenditures have NOT dropped as much or as quickly as expected.

    The theory as to why not revolves around consumers continuing to spend by running up their credit card balances, by drawing down their savings account balances etc. However, the same theory says that unless some major miracle rescues the declining housing index real fast, that consumers will very soon maxx out their credit cards and will very soon drain their savings accounts thus forcing a huge drop in personal consumption expenditures. This huge drop will likely catch up to the housing index with a vengeance, probably leading to a fairly severe recession.
    Last edited by Melonie; 10-06-2007 at 01:03 PM.

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    Default Re: chart of the week - Personal Consumer Spending

    Oh?........ great....


    Blah...


    More good news, yippiiiiiie!

    Why can't things get better? Ever?
    Quote Originally Posted by Jay12 View Post
    ^What Sophia said.
    Quote Originally Posted by yoda57us View Post
    I wish there was an "auto-like" setting that I could just have applied to all of your posts Sophia....

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    Banned Melonie's Avatar
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    Default Re: chart of the week - Personal Consumer Spending

    Why can't things get better? Ever?
    “The definition of insanity is doing the same thing over and over and
    expecting different results. ” - Benjamin Franklin


    In other words, as long as US consumers / gov't keeps spending more money than is being 'created' in terms of real productivity, as opposed to spending money 'created' out of nothingness by the FED or spending money borrowed from foreigners, America will continue to become poorer as a whole.

    And on another 'tack', as long as gov't intervenes in the free market, price signals will be distorted causing supply / demand to be distorted as well. Arguably, the US gov't has intervened in the housing market in a huge fashion, from offering home mortgage interest tax deductions to homeowners, to establishing zoning requirements for new home construction (i.e. minimum size building lots, single family homes only vs duplex / multi), to requiring that gov't employees must live (thus buy a house) within certain geographic boundaries etc. These gov't rules / laws helped to create housing shortages in certain areas (i.e. near fast growing cities), which in turn caused the price of houses in those areas to skyrocket in the first place.

    The gov't then decided to intervene on the financial side of the housing market by promoting / guaranteeing home mortgage loans for people that banks would normally have considered to be bad credit risks. This started out as a HUD directive to Fannie Mae and Freddie Mac to write more home mortgage loans for urban minorities, but was expanded by the US courts to include bad credit risk borrowers of all races, creeds and colors. Not only did this further increase demand for housing in / near fast growing cities by allowing bad credit risk potential homeowners to actually become homeowners, but it also required that mortgage lenders find a new 'capital' source for funding these risky mortgages ... thus giving birth to CDO's, MBS's and other means of supposedly transferring the inherently higher 'risk' of these mortgages away from the mortgage lender and onto the shoulders of a secondary (in most cases foreign) investor.

    So here we are several years down the road, many of the bad credit risk borrowers of all races, creeds and colors are defaulting on their gov't encouraged home mortgage loans, thus foreclosed properties are being liquidated driving down market prices for real estate (with the markets formerly experiencing the greatest shortages / highest prices now seeing the greatest effects). The (foreign) investors are experiencing losses, and are deciding to get out of these CDO / MBS investments (and thus get out of the US dollar) to cut their losses ... bringing on major unintended consequences.

    The 'Insanity' quote stems from new proposals (most notably by my own Senator Chuck Schumer) and potential new gov't directives intended to prevent these high risk homeowners from going bankrupt ... among them directing Fannie Mae and Freddie Mac ( = the US taxpayer) to hold a larger dollar amount of risky mortgages rather than reselling them ... among them possible new regulatory guidelines mandating that mortgage lenders alter the terms of existing mortgages after the fact (which prevents the lender / investors from receiving their promised rate of return and also prevents the lenders / investors from foreclosing and getting part of their invested money back) ... among them future rate increases on US taxpayers to pay for these 'bailout' measures. The 'Insanity' of course stems from their idea that even MORE gov't intervention into the real estate financing market will somehow fix a problem that was arguably caused by gov't intervention into the real estate financing market to start with !!!!


    As to things getting better, this boils down to a question of things getting better for some versus things getting better for all. Under the gov't intervention scenario, things DO get better for the 'poor' ... because they were able to buy a house that they can't really afford, which the gov't will now apparently make sure they can't be evicted from when they fall behind in mortgage payments ! Under the gov't intervention scenario, things DO get better for the 'rich', because they are able to collect high interest earnings from the 'gov't guaranteed' repackaged MBS's they buy from Fannie Mae and Freddie Mac (with the interest earnings likely being augmented via the injection of US taxpayer funds). And for the 'very rich', they can afford to buy high interest rate paying municipal housing authority bonds which also exempt the 'very rich' from having to pay fed / state income taxes on their muni bond earnings !!!!

    Under the gov't intervention scenario, it is mainly the 'middle class' that experiences the negative effects, mostly via higher taxes and higher US dollar price inflation vs stagnant incomes. But it is also mainly the 'middle class' that is the source of consumer spending, such that squeezing the 'middle class' eventually translates into consumer spending drying up ... which is what gives birth to recessions. But again, for the most part, the 'poor' and the 'very rich' are far less affected by recessions than the 'middle class'.

    ~
    Last edited by Melonie; 10-07-2007 at 07:24 AM.

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    Default Re: chart of the week - Personal Consumer Spending

    Quote Originally Posted by Melonie View Post
    “The definition of insanity is doing the same thing over and over and
    expecting different results. ” - Benjamin Franklin


    In other words, as long as US consumers / gov't keeps spending more money than is being 'created' in terms of real productivity, as opposed to spending money 'created' out of nothingness by the FED or spending money borrowed from foreigners, America will continue to become poorer as a whole.

    And on another 'tack', as long as gov't intervenes in the free market, price signals will be distorted causing supply / demand to be distorted as well. Arguably, the US gov't has intervened in the housing market in a huge fashion, from offering home mortgage interest tax deductions to homeowners, to establishing zoning requirements for new home construction (i.e. minimum size building lots, single family homes only vs duplex / multi), to requiring that gov't employees must live (thus buy a house) within certain geographic boundaries etc. These gov't rules / laws helped to create housing shortages in certain areas (i.e. near fast growing cities), which in turn caused the price of houses in those areas to skyrocket in the first place...
    Well, er, this is a "conspiracy theory" link, but nevertheless, it's an interesting read re: the middle class being "targeted" for destruction by some of the so-called "elite" classes,

    http://www.prisonplanet.com/articles...ddle_class.htm

    I'm not sure if this is plausible or not, but with all the stuff going on about the sub-prime mortgage market in the last few months, such manipulations are appearing much more plausible to me lately.

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    Default Re: chart of the week - Personal Consumer Spending

    ^^^ and your article touches on the next aspect of the 'BIG LIE' plan ... using global warming as a basis to institute a carbon tax (globally, eventually), which essentially boils down to a gov't / global body of power who can then dictate which organizations can consume large quantities of energy versus which cannot.

    On a much more immediate basis, a stiff hike in the US dollar denominated price of oil will certainly cause the bottom to drop out of personal consumer expenditures - prompting a severe recession. Arguably the mechanism for causing this to happen will be an attack on Iran by the US, the French and the UK as well.

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    Default Re: chart of the week - Personal Consumer Spending

    Quote Originally Posted by Sophia_Starina View Post
    Oh?........ great....


    Blah...


    More good news, yippiiiiiie!

    Why can't things get better? Ever?
    They don't call economics "The dismal science" without reason!

    Funny thing though, is that economics seems to be found in liberal arts colleges, not science or engineering!

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    Default Re: chart of the week - Personal Consumer Spending

    Quote Originally Posted by PhaedrusZ View Post
    Well, er, this is a "conspiracy theory" link, but nevertheless, it's an interesting read re: the middle class being "targeted" for destruction by some of the so-called "elite" classes,



    I'm not sure if this is plausible or not, but with all the stuff going on about the sub-prime mortgage market in the last few months, such manipulations are appearing much more plausible to me lately.
    Ah, my man Alex.

    I think the base of what he is saying is true.

    I also believe it is more a natural progression from the actions and circumstances we all live in.

    I don't believe it is a huge conspiracy by "them."

    I think it is more of a result of ideology we all think is right but refuse to see the failures in or to do anything about.

    It is a cultural mindset, not the illuminati.

    I think many of his readers are simply looking for an explanation. It is part of the "authority" mindset. The reality of many trends and their interactions, random events, individual choices, etc. all are quite heavy on the neurons. Best to try and pin it on some global monarchy.

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    Default Re: chart of the week - Personal Consumer Spending

    Oh god, I think I agree with almost all of the above points, particularly Melonie's evolution of the housing crisis.

    However, I just cannot connect to the "big lie" plan and global warming as a conspiracy, however long I've been hearing about it in skeptical circles. Perhaps its because I believe there can be something GOOD that comes out of environmental efficiency? Not sure, really....

    "Have you ever been to American wedding? Where is the vodka, where's marinated herring?" - GB
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    Default Re: chart of the week - Personal Consumer Spending

    I don't want to go off the deep end re political overtones / conspiracy theories here in DD ... however the magnitude of this proposed tax in terms of both direct and indirect effects on US and Canadian consumers can't possibly be ignored. You may want to have a look at ...

    (snip)"Getting back to the North American Forum meeting in Banff, notes from the meeting make the statement that there is "significant interest" in climate change, a fact which can be leveraged to impose a carbon tax. This document goes on to state that the infrastructure of the North American Union should be implemented in secret, essentially "Evolution by Stealth". Wait a minute, this is supposed to be government by, of, and for the people, there was never any mention of stealth.

    So in summary, we have the Washington Post publicly pushing for a carbon tax on behalf of the Trilateral Commission, and we have the SPP operating in relative obscurity thanks in no small part to the media's willingness to look the other way, privately pushing for a carbon tax to help fund the infrastructure of the forthcoming North American Union. Moreover, we suddenly have the unprecedented consensus between the media and all political parties, spearheaded by a former government official, regarding the threat of global warming, an issue that has only been ignored, obfuscated, and ostracized by politicians and the media in the past. Based on all of this, one can't help but ask the question; is the sudden Global Warming hysteria fueled by politicians and the media really an effort by the corporate elite to impose a carbon tax to fund the North American Union?

    Should we be concerned about the fact that the North American Union is being implemented in secret, without consulting congress or the taxpayer? Should we be concerned about our own sovereignty? Is this plan and the shady implementation of it even legal? Lets look a little further into the implications of such an agreement. The Banff North American Forum documents state on more than one occasion of the need to narrow the gap between the average Mexican income and its northern neighbours and that this might be the single most important issue on the North American Agenda. The question is how will they do it? And how much will the average Canadian and American incomes suffer? "(snip)

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