I have written before how fatally linked the US economy is to housing because Americans have been using their homes as ATM machines which fueled spending on big and small ticket items.
http://query.nytimes.com/...
The majority of the United States economy is driven by domestic spending also known as "the consumer" and if Americans stop consuming then the economy will come to grinding halt. The problem for Americans is that their homes have been used as an ATM and that has come to an end.
"Home prices tumbled by the steepest rate ever in May, according to a closely watched housing index released Tuesday, as the housing slump deepened nationwide. The Standard & Poor's/Case-Shiller 20-city index dropped by 15.8 percent in May compared with a year ago, a record decline since its inception in 2000. The 10-city index plunged 16.9 percent, its biggest decline in its 21-year history
(Huffington Post, 2008).
http://www.huffingtonpost.com/...
It is important to review the current economic situation in America:
- Wages are stagnant
- Food, fuel, health care, education, and everything else are going higher
- Credit restrictions are getting tougher
- 7 banks have failed this year
- Government revenues are shrinking
- Deficits are climbing higher
What can Americans do if the cost of everything is going higher but their wages are stagnant and can no longer tap into their home equity? Oh yes, their credit cards.......!
"We've never seen anything like this," says Estes, who counsels clients by phone from her office in Richmond, Va. "Their homes are at risk, and they know it. But people say, 'I don't want to let my credit cards go because that's my cash flow. "
http://www.usatoday.com/...
Unfortunately, the numbers of credit accounts that were 60 days delinquent, or had been charged off already have also increased!!! I can hear you thinking...No raises, no more home equity ATM, and no more credit cards....What will we do...? The answer is families will increasingly depend on each other for housing and financial support.
That economic pain you’re feeling is the start of a downward shift in your standard of living.
http://butlerdemblog.blogspot.com/...