Worse is Yet To Come , Lower Standard Of Living?

[MA-Caver]

"Worst Is Yet to Come:" Americans' Standard of Living Permanently Changed

Posted Feb 17, 2009 12:53pm EST by Aaron Task in Investing, Recession Related: WMT, WFMI, FDO, ^GSPC, ^DJI, RTH, TGT

There's no question the American consumer is hurting in the face of a burst housing bubble, financial market meltdown and rising unemployment. But "the worst is yet to come," according to Howard Davidowitz, chairman of Davidowitz & Associates, who believes American's standard of living is undergoing a "permanent change" - and not for the better as a result of:

• An $8 trillion negative wealth effect from declining home values.
• A $10 trillion negative wealth effect from weakened capital markets.
• A $14 trillion consumer debt load amid "exploding unemployment", leading to "exploding bankruptcies."

"The average American used to be able to borrow to buy a home, send their kids to a good school [and] buy a car," Davidowitz says. "A lot of that is gone."


http://finance.yahoo.com/tech-ticker/article/176478/%22Worst-Is-Yet-to-Come%22-Americans%27-Standard-of-Living-Permanently-Changed?tickers=WMT,WFMI,FDO,^GSPC,^DJI,RTH

The video is important to watch as well (wish it was captioned)...

Time to start stocking up on dried foods, foods that can maintain a long shelf life... food may be THE most important commodity but it's also going to be the most scarce.
Those who are wealthy enough to weather this storm should do well to do the same I think. It's going to get rougher.

Are you prepared to do with LESS... a LOT less? Ask yourself before replying.

http://finance.yahoo.com/tech-ticker/article/176478/

 

[bushidomartialarts]

My wife and I have intentionally lived below the american 'standard' for years. We live in much less house than we can afford, drive much less car than we could, our furniture is used or built by me. I cook dinner for us most nights. No TV at all, let alone a plasma screen in each and every room.

I don't know if I believe all the doom talk...there are persuasive, valid arguments for almost every point on the spectrum from a new depression to miraculous recovery. I don't believe it's time to stock up on canned food and shotgun shells, nor do I think we'll all be zillionaires tomorrow.

It's just important to remember that wealth is relative: we don't have to have a million in the bank to weather this, we just have to keep spending less than we make each month.

 

[Bill Mattocks]

I was too lazy to go 'survivalist' in the 1980's recession. I was too lazy to stock up on food and water during the Y2K freakout. I'm not going to lay doggo during this thing, either.

One foot in front of the other, keep an eye on the situation, try to stay out of or get out of debt, try to stay employed, and eventually things will improve. There will even be opportunities along the way. Life always finds a way.

 

[Bob Hubbard]

McDonalds is opening 1,000 new locations, a regional pet store is opening 4 new locations in WNY this year, Hobby Lobby is expanding and hiring management, etc.

Yes, credit tighter, but it should be.

Yes, over valued homes in superinflated markets are dropping like rocks. Most are losing little real value.

Bloated businesses are being forced to get lean and mean, same is true with government.

We can't afford the "nanny state" any more, so the bloated bureaucracy as to be trimmed, and all those baby coddling programs are being considered for cutting.

Guess that'll mean that we're going to have to start taking care of ourselves again, be responsible financially, and think before we spend $5 on a latte..
Oh isn't that a shame.

 

[MA-Caver]

My wife and I have intentionally lived below the american 'standard' for years. We live in much less house than we can afford, drive much less car than we could, our furniture is used or built by me. I cook dinner for us most nights. No TV at all, let alone a plasma screen in each and every room.

I don't know if I believe all the doom talk...there are persuasive, valid arguments for almost every point on the spectrum from a new depression to miraculous recovery. I don't believe it's time to stock up on canned food and shotgun shells, nor do I think we'll all be zillionaires tomorrow.

It's just important to remember that wealth is relative: we don't have to have a million in the bank to weather this, we just have to keep spending less than we make each month.

Well yes that's the way to do it for the most part. You and your missus have good heads on your shoulders and that's great, honestly. One of the things the guy was saying in the video was that before people were spending up to 6% more than what they earned... you apparently were going the opposite direction and that's brilliant.

Same reason why I try to encourage young couples that I meet to plan ahead to buy funeral arrangements ahead of time as morbid as it sounds it makes sense to do so. One less thing to worry about.

This article talks about how will we know when it's going to get better... http://finance.yahoo.com/news/How-To-Tell-When-The-Economys-usnews-14351762.html
I believe that it will eventually, I do have faith in the American system that we will recover but not for some time yet. So people will need to cut back and will need to do what bushidomartialarts has been doing. Living less than what they're used to. Go below that personal comfort zone.
The positive thing that I think people need to appreciate is that they WILL survive.
If they live smartly.

 

[searcher]

My Wife and I have been living below our means for some time now and we arepreparing to lower ourselves down a considerable amount more. We have talked about starting to dry food and stock up on canned goods. We are fortunate enough to live in an area where food is grown in many a garden.

Being raised by a self-proclaimed survivalist, I havealready started stockingup on various calibers of ammunition as well, not just for defense, but for theoptionof getting food from the woods. If you thinkof the song Country Boy Can Survive That is how I was raised and how I choose to live.

 

[Bill Mattocks]

We can't afford the "nanny state" any more, so the bloated bureaucracy as to be trimmed, and all those baby coddling programs are being considered for cutting.

Guess I agree with all of that, but not this part. The stimulus package, which is now law, creates more government bureaucracy and more government employees, in perpetuity, to protect us all and 'create jobs'.

Economy does well - government grows. Economy does poorly - government grows.

Well, not state governments. But they were never the problem anyway.

 

[Bob Hubbard]

Ah, but those are Federal programs. I'm referring to the state level, where NY will soon face a tax payer revolt (with Patterson's 140+ new taxes and fees, and recent raises for our "leaders"), and California is looking to liquidate half of their gov. employees. Other states are equally broke and looking for cuts and revenue.

I think the "stim package" is a mistake, same as it's 11 predecessors, and the 3 in the planning stage follow ups. You don't create jobs by giving individuals cash, you create jobs by creating an environment where businesses can expand. That's tax breaks, zoning breaks, etc. Give me $300, I'll pay my past due bills with it. Give my company money, and I'll update equipment, advertise, and hire help....and stop having past due bills. Of course, I live without credit on a cash basis, have for years.

It would be nice if they would read stuff b4 they pass it but, that's almost like work and our coddled, over paid and pampered elite "leaders" are too busy to do that. They have to "save us" ya' know.

 

[Bill Mattocks]

Ah, but those are Federal programs. I'm referring to the state level, where NY will soon face a tax payer revolt (with Patterson's 140+ new taxes and fees, and recent raises for our "leaders"), and California is looking to liquidate half of their gov. employees. Other states are equally broke and looking for cuts and revenue.

True, true. But I have never seen state governments as part of a bigger evil, well maybe NY and CA, but not most of them. Most of them never did intrude much into my life - just the feds.

And unfortunately, this downturn makes the fed stronger - again, and makes the states weaker - again.

Sorry, I'm a Jeffersonian, not a Hamiltonian.

I think the "stim package" is a mistake, same as it's 11 predecessors, and the 3 in the planning stage follow ups. You don't create jobs by giving individuals cash, you create jobs by creating an environment where businesses can expand. That's tax breaks, zoning breaks, etc. Give me $300, I'll pay my past due bills with it. Give my company money, and I'll update equipment, advertise, and hire help....and stop having past due bills. Of course, I live without credit on a cash basis, have for years.

Agreed.

It would be nice if they would read stuff b4 they pass it but, that's almost like work and our coddled, over paid and pampered elite "leaders" are too busy to do that. They have to "save us" ya' know.

I was talking to my wife about it last night, and I said that it was almost like they had to do it, a 'populist' move that any president in office would have had to do. She said "who is demanding it?" Good point, that. Not the people, who on the whole seem to be pretty much getting the point of what needs to be done and are NOT demanding this hunk of garbage 'stimulus'.

 

[Bob Hubbard]

Nice to see another Jeffersonian on the board.

 

[Rich Parsons]

I know if one looks for new articles the last few ears one will find that there have been references to a planet standard of living. To raising the standard of living of other countries. It is a matter of resources and allocation.

Assume there is a finite amount of resources and this is distributed around the world. Now, these resources have value and that value varies depending upon country and or resource in question. But if charted from a high level one could see a curve. And on this chart if one was to be able to represent standard of living as well one would see that this is a curve. Now to raise the standard of living of other countries one needs to look at the area under the curve. If you raise it in one location usually the area under curve is considered finite. A known value, unless there is a new resource or some other commodity that is made available. So, as one raises the standard of living in another area, it usually means that it is lower in others (* Assumption resources and work level are constant *) . It is easier for those at the top to drop a little of their standard of living and spread it to others than it would be for those in the middle to loose a lot and spread it to the lower end. So as one raises the standard of living in one area, one should expect the lowering of in another area.


Technology and other advances in skill and such can raise the standard of living and as this information is shared then the standard of living also improves. In this case those on the top can remain where they are at, while the others a raised up. But when one begins to talk about things, and the "Buying Power" to obtain these things, then this technology can be sold to others for an increase in "Buying Power", but if there is no new technology to disperse, and it is the outsourcing of jobs to cheaper labor so companies can make money. i.e. stocks and mutual funds and 401K and IRA's, then the cost is a place where many look to save money. Our country has been doing this for decades, with textiles and assembly and even technology manufacturing. The technology point is interesting as many times it can be developed here, but because of regulation about waste or by product it is easier and cheaper to make it in another country.

So, while we are at home posting to the internet on our computers, and flat screen monitors (* I opted not to get one last fall, I recycled and old tube monitor *) and our big screen TV's and our Palms and Phones and all other items manufactured overseas.


******

I have read about the levels of society and 4th phase being service and communication, while 3rd is manufacturing. Some European countries have gone the way of this 4th stage. But even they are finding the financial crisis and lack of credit an issue for their economy.


My point is that, while it sucks and it really sucks. (* I could loose my job at work even though I saved $15 Million USD last year alone. *) I am not as surprised as others. I am still invested in my 401K. I did not have a magic view into the future to know when to move investments.


Banks need money in their vaults so they can lend money out. But even if people are borrowing they need people who can make the payments and the interest payments in particular. This means that these people need jobs. Jobs mean companies that have a product that is selling and continue to pay its employees. These Employees feel comfortable to go out and buy or finance items. But the companies as stated need people with jobs to buy their product so they can continue to employ people so they can go out and buy things.



I was and am one of the bad people for the economy. I do not buy lots of things. I buy things on sale and I pay cash or on credit I pay it off monthly without interest or fees.

The credit industry used to sell $100 of your credit bill for $115. As the person buying your credit expected to make interest and late fee charges on you.

Now the industry is trying to sell that same $100 for $70 to $80, and there are no takers. Those who are defaulting are increasing.


With the "BAIL OUT - Incentive Legislation" Just signed by Pres Obama, much of this is not good for the immediate problem. The avera person will get beginning in May $13 per week more in their check for a one time tax break this year. (* Note, I will be taking a 3% pay decrease in May, which is not even close. But 3% less is better than 100% less. *) If you watch the market when it was press released it fell 200 points. Then as it was announced in the Senate and House each it lost near 100 points each as well. The experts that got us in this financial mess, do not think this will help. Why? It helps us in 18 to 24 months. Many of these programs will take time to bid and get estimates and have designs drawn up. Then people can begin to hire people for jobs.

Now the current $75 Billion bailout of the Mortage for those about to default is a good thing for the economy on the short term as this means the bansk do not have to worry about loosing this money and they might even get back to $100 being sold for $100.

But the problem with this is that the Fed Reserve has already absorbed hundereds of billions of dollars and the US has also picked up 200 Billion for Fannie Mae and Freddie Mac.

It is difficult to understand these amounts. It is difficult to understnad the long term effects this will have on the US Dollar.


The only good thing about that from the US stand point is that the US is not alone. England, Japan, Mainland Europe are all having slow downs in economy and banking issues and defaults. The big untouchable Japanese companies are looking to close plants in the US and they have plants idle in Japan. It is global in impact. So, while it sucks it sucsk for everyone. The playing field might come out a little more level in the end, and most likelt the US citizens are the ones who will loose. But, the loss could be worse if the same was occuring now and not in the rest of the world. For the disparity of the "Value" of money could become an issue. As this is happening across the board to all the major monitary systems they are also being effected in to a leveling effect and not being sent into a tail spin.

 

[Deaf Smith]

Excuse me guys, but I'm to busy starting my 'victory' guardan and burying my gold before the government takes it (as they did in the last depression) to post much

Lower standard of living? Well, it depends on what you measure it to. I bet the rest of the world will have ALOT LOWER STANDARD OF LIVING before this is over.

You cannot spend your way out of bankruptcy. All you will do is drag alot of others with you once the bill comes due. You will delay the effects some, but sooner or later it will hit you in the end (but harder.)

Let's say you are barly making ends meet. Then the gas prices rise so much you can't even drive to work each week and still pay the house bills (and that is what happened.) So you whip out your credit card (the stimulus card) and charge and charge and charge. One day you max out that card and no one can afford to give you any credit.

Well the bill then comes due! Only now the companies that extended credit will be in the same place you are.

And that is what is happening to the good old U.S.A. right now. Instead of takeing the medicine (cut taxes and cut spending) we will increase taxes, increase spending... but when you increase taxes people just don't work as much (read earn as much) so the tax revenue is actually LESS that what it was before!

The bill will come due one day, that much I can assure you.

Deaf

 

[MA-Caver]

Excuse me guys, but I'm to busy starting my 'victory' guardan and burying my gold before the government takes it (as they did in the last depression) to post much

Lower standard of living? Well, it depends on what you measure it to. I bet the rest of the world will have ALOT LOWER STANDARD OF LIVING before this is over.

You cannot spend your way out of bankruptcy. All you will do is drag alot of others with you once the bill comes due. You will delay the effects some, but sooner or later it will hit you in the end (but harder.)

Let's say you are barly making ends meet. Then the gas prices rise so much you can't even drive to work each week and still pay the house bills (and that is what happened.) So you whip out your credit card (the stimulus card) and charge and charge and charge. One day you max out that card and no one can afford to give you any credit.

Well the bill then comes due! Only now the companies that extended credit will be in the same place you are.

And that is what is happening to the good old U.S.A. right now. Instead of takeing the medicine (cut taxes and cut spending) we will increase taxes, increase spending... but when you increase taxes people just don't work as much (read earn as much) so the tax revenue is actually LESS that what it was before!

The bill will come due one day, that much I can assure you.

Deaf

I paraphrase Shakespeare: "First thing we do is kill all the bankers!"

 

[JadecloudAlchemist]

We just bought a new 42inch Plasma tv.

Having been homeless before when I was younger and having stayed with a friend who lived in a mansion I think I have had both extremes.

I buy what I want and what I need and let the cards fall where they fall.

Life can change in any second it is best to be able to adapt to it and live your life freely.

 

[Rich Parsons]

We just bought a new 42inch Plasma tv.

Having been homeless before when I was younger and having stayed with a friend who lived in a mansion I think I have had both extremes.

I buy what I want and what I need and let the cards fall where they fall.

Life can change in any second it is best to be able to adapt to it and live your life freely.

So you openly admit that your standard of living as changed int your life for a better and worse levels than where it is today.


I have had it worse, where I collected cans to get food money. But I would prefer not to go back to that.

Some people think I have a lot, but my debt ratio is low, and I live wear I am happy. (* My 26" Flat Screen bought 18 months ago on sale was a cheap off brand name. But only bought as Digital transition was coming and my old TV from 1981 finally broke. *)

I see nothing wrong with people buying 42" Plasma TV's.

If you want it and can afford it, then buy it. If you want it and are willing to sacrifice for it then buy it.

 

[JadecloudAlchemist]

So you openly admit that your standard of living as changed int your life for a better and worse levels than where it is today.

Yes I admit it my standard of living as of today is fine.

 

[Deaf Smith]

It's not what the standard of living is for you today. It's what it will be in a few years. As the taxes go up, the services go down, the unemployment goes up, the goods you see in the stores drys up (if all the other countries can't sell here, then what are you going to buy?)

Then what is left on the shelf ('buy American') will be much higher in price, then, and only then will you see how your standard of living has gone down.

The only ones not so affected will the the Kennedys and Rockefeller and limousine liberals with a sprinkling of lawyers and oilmen. But then, that's how it was in the '30s.

Deaf

 

[Ray]

I tell you, it's the 70's all over again. High unemployment is forcast and a shrinking economy is too. Just wait, all the unsupported gov't spending is sure to fuel inflation.

 

[Deaf Smith]

I tell you, it's the 70's all over again. High unemployment is forcast and a shrinking economy is too. Just wait, all the unsupported gov't spending is sure to fuel inflation.

Got a point there. Rememer the Great Society of LBJs? Hey, and remember VIETNAM? And remember Jimmy "Malaise" Carter? That Obama now. Just remember what Marx said (Carl, not Groucho), "History repeats itself, first time as tragedy, second time as farce."

It all ended when Ronald Reagan became President. Let's hope Sarah is the real deal.

Deaf