Thursday, October 14, 2010

Quiet Cash Registers

It's not your imagination.

People are NOT spending money.

Overall, Americans' spending averaged $59 per day during September -- down from $63 in August and $68 in July, and lower than the $66 of September 2009. Americans' spending has generally been running slightly higher in 2010 than it did in 2009 -- though substantially below the recessionary spending levels of 2008. September spending matches the previous lows of February 2010 and March 2009.

The link has excellent charts.

The topmost chart shows spending patterns of those earning <$90K/year, and it is just dismal.

27 comments:

Deekaman said...

Recovery summer! Can you imagine the stock market were it not propped up by the Fed?

TerryN said...

Between 1990 and 2004 I bought five new upscale SUV's. The 04 model I currently own has more miles on it than anything I ever drove post college.

It's mileage will rival the mileage on some of the cars I used to deliver pizza in back in the 1970's before I sell it, thanks to the current economic policies of the central planners in the White House.

Deekaman said...

10 year old Dodge and 10 year old (pre-Gummint Motors) Chevy. The Dodge has 175,000 miles. Can't justify a new one when I don't know if I'll have a job tomorrow.

Neo-Con Tastic said...

I have reduced my short-term debt by over 60% while increasing my savings DRASTICALLY (about 5x more). This is a total 180 from 2007.

And like Deek/Terry, I'm sticking with my vehicles until I don't have a choice.

Grim said...

I own two trucks. One is 14 years old; the other is 17 years old. I'm putting a rebuilt engine in the younger one this week; figure I'll drive it a little farther.

After all, it's paid for.

neomom said...

'04 Toyota and an '05 Honda... both with more miles than anything else ever. Both paid for.

I close on a refi on the domicile tomorrow.... 2nd one in 18 months to lower interest rates... In January, we will (sans mortgage) debt free.

Nope, I'm not spending.

Anonymous said...

Sucks to be you guys. With my government job, combined with my wife illegally collecting unemployment, we're rolling in dough!

No, this is NOT sarcasm, I'm serious. Sucks to be you!

Anonymous said...

My husband earns about 130k....and we have always lived below our means....our house is 13 percent of our income. It's in a mid- income neighborhood that used to be ritzy --way back in the 80's. This is the house we could afford and still save and stay debt free. Not 250k, not 300k...but a 150,000 mortgage. Because most of us do not make enough to afford 2/3rds of the housing built in the last 20 years. Not even 150 k a year is enough. Meanwhile, I see people earning far less living in much more expensive neighborhoods. How is that fair? How on earth can they afford their huge house payments and living expenses and save? We save 15 % of our income. I don't have a lot of new furniture. I would really like to own a bedroom set! My living furniture is 15 years old...refinished antiques because they were cheap...craigslist for furniture...It gets my goat to see so many people living high off the hog. I feel, after scrimping to save and do the right things, that eventually I will have to pay for their foolishness. We remodeled our house doing the back breaking work ourselves with 4 little ones while the less affluent took out home equity loans and watched TV. I shopped lower end stores while they shopped gap and turned their noses up at our clothes. We still drive a '98 Voyager and '04 Odyssey. I go to Aldi while they shop Sendiks and Whole Foods.
If these people find themselves in debt, using credit cards to buy basics, I say serves them right. If their spending is down, it's about time. We bought that house within our means to actually pay it off and manage our bill without taking on debt. Don't you think I wanted a beautiful new home in a neighborhood? where people get it that eventually your house needs a paint job and that the black stuff growing on your eaves isn't supposed to be there and the bushes need to be trimmed and the weeds pulled (people who moved in when money was easy to get). I wish I would have known how to capitalize on their foolishness! I would have made a fortune. Meanwhile, others who got those beautiful new houses on little income (sorry, 90k shouldn't get you anything more than an 180k mortgage) can enjoy their upscale neighborhoods and nice cars while worrying themselves gray over their debts. I hope.

Deekaman said...

Our anonymous government worker friend is a large part of the problem and a big reason for the rise of the TEA Parties. I generally don't engage in Schadenfreude, but every time I hear of a government worker caught in some activity which is illegal, immoral or fattening, I get a little thrill up my leg. My fervent hope is when government jobs are cut, this guy is the first to go.

Shameless, rudderless, clueless.

GOR said...

To Anon at 12:56 – Exactly!

The profligacy of so many people living beyond their means is one of the reasons for our current economic condition - aided and abetted by government initiatives such as the Community Reinvestment Act and advocacy group such as ACORN. Banks were blackmailed into making loans to people who couldn’t afford them under threat of legal repercussions for ‘red-lining’. But some in banking saw this as an opportunity for profits and willingly cooperated - resulting in the foreclosure avalanche we have today.

But basically it comes back to individual responsibility. Live within your means, honor your commitments and if you bite off more than you can chew don’t look to government (i.e. the rest of us) to bail you out!

J. Strupp said...

"Banks were blackmailed into making loans to people who couldn’t afford them under threat of legal repercussions for ‘red-lining’."

This is crap. Banks made loans to people who couldn't afford them because they were making piles of money in doing so. The private investment banking industry dwarfed Fannie and Freddie in terms of total mortgage marketshare leading up to the financial crisis. This is a fact. You are perpetuating lies told by people who have no idea what they are talking about. Just for the record.

J. Strupp said...

Anon,

If you have a gross income of $130,000, do not have a mortgage, are completely debt free and only save about 15% of your net income then you are either sitting on a pile of cash or you are spending a boat load of money elsewhere (education, vacations, health care, etc.) Either way, you can most likely afford a new bedroom set. I enjoyed your story though.

J. Strupp said...

And last but not least Neomom:

"I close on a refi on the domicile tomorrow.... 2nd one in 18 months to lower interest rates... In January, we will (sans mortgage) debt free."

IOW, the Fed.'s QE policies have directly and indirectly driven the 10 year yield down below 3% and backstopped the mortgage industry, thus dropping mortgage rates down to the point in which you could refinance your mortgage and put another $100-$200/month (a guess) in your pocket which you could use to shrink your personal balance sheet.

Make sure you remember that extra $1,200-$2,400/year Uncle Sam hooked you up with next time you complain about your taxes.

GOR said...

Just for the record Strupp, I am a retired banker - having spend almost 30 years in the business. What's your background? And I am talking about Commercial Banks - not Wall St. Investment banks.

Whenever we planned to open a new branch, we were picketed by ACORN and Co. who wanted more lending in 'depressed areas' - and we weren't the only one. That was blackmail - pure and simple - to gain funds for their and the Democrats' social agenda.

Through CRA banks were forced to make more loans to people and areas with a high risk of default just to keep their numbers up and avoid penalties. That was blackmail too, under cover of a legal veneer.

Commercial Banks are not non-profit humanitarian organizations, though they contribute millions to charities and local communities. They're in business to make money like any other business - not to enact the social agenda of the Democrat Party.

Those are the facts, jack.

J. Strupp said...

"Whenever we planned to open a new branch, we were picketed by ACORN and Co. who wanted more lending in 'depressed areas' - and we weren't the only one. That was blackmail - pure and simple - to gain funds for their and the Democrats' social agenda."

"They're in business to make money like any other business - not to enact the social agenda of the Democrat Party."

You're contradicting yourself and proving my point at the same time. Banks are in the business to make money so the idea that they were somehow blackmailed into making bad loans to fulfill the Democrats social agenda is a complete farce. The vast majority of bad loans your colleagues made were because of loose lending standards, higher returns on those loans and the relatively ease to which those loans could be resold up the food chain. If you think the average banker made loans to people who couldn't afford them because they were trying to fulfill a democratic social agenda that was forced upon them then, well, I have a bridge to sell you.

Dad29 said...

Heh.

I was in the bank-biz at the time CRA showed up. (They didn't let me lend money--for good reason.)

I can tell you that the Bank I worked for--run by a Democrat--was extremely conscious of CRA. We all got lengthy lectures on the topic, and IIRC there was at least one audit which resulted in more lending in our 'urban' affiliates.

And there were repercussions; one of the affiliates was run by a conservative (R) guy who kicked and fought about what CRA was doing to his institution.

Dad29 said...

Clearly, Struppster, you don't understand the bank business.

1) Don't think for one minute that the business model of the 1970's/'80's was the same as the one used in the 2000's. It wasn't.

2) SOME Banks--then and now--"front-ended" mortgage loans, selling off the paper after putting the deal together. But they were responsible for the loan; if there was a default, the Bank had to eat the damn thing. (That hasn't happened....yet...in today's MERS Mess.)

As a result, the Banks made less-than-good loans, sold them, and prayed that the bad ones would not come back for several years. IOW, they kicked the can downstream.

And there WAS pressure, trust me. GOR knows--and you don't.

GOR said...

Logic isn't your strong suit, Strupp!

J. Strupp said...

1. I don't. And I didn't.

2. No one is saying that there wasn't/isn't pressure. I'm saying that if you think CRA is the front and center cause of bad bank loans made by the majority of the banking industry in the last 10 years you aren't seeing the big picture.


Somehow you forgot that we actually agree on this Dadster.

neomom said...

strupp -

Lets just say that the family unit brings in less than Anony above.... After adding up all the taxes and fees we pay - sales, property, fed/state income, medicare, FICA, gas, DMV, yada yada... We give the various governmental agencies about 47% of what is earned.

Regardless of QE letting me keep pay about $150 less per month in interest rates, I still pay far too much in taxes.

Anonymous said...

Anonymous said...RE:
If you have a gross income of $130,000, do not have a mortgage, are completely debt free and only save about 15% of your net income then you are either sitting on a pile of cash or you are spending a boat load of money elsewhere (education, vacations, health care, etc.) Either way, you can most likely afford a new bedroom set. I enjoyed your story though.
*****(this reply sounds to me like a challenge)
you'd think we are sitting on a boatload of money, but NO!!!!!so listen, scheisskoph:
Life is expensive. Food costs are astronomical--our biggest expense. No one in my family is fat. Our "boatload of cash" went to pay for the new roof, shot windows, furnace and air that went out in 2007, 2008, and 2009---stuff we could see was shot/needed attention when we bought the house 10 years ago when it was only 14 years old. Just like every other house we looked at. Meanwhile the builders featured overpriced garbage. We paid for all those projects and a few remodeling projects in cash. Like a kitchen that my husband put in. Like people used to do before they decided they deserved to live as though they are wealthy.
BECAUSE IT'S A BAD IDEA TO TAKE OUT SECOND MORTGAGES TO PAY FOR THIS STUFF!
Eventually all homes fall apart and have to be fixed. And some of us actually pay for this with our extra money without borrowing. This means we do not have boatloads of money left over. Living debt-free is expensive. Get it? We home school because private school tuition is out of the question and home school is a better education for our kids. Then it will be college, which I don't even know if I can afford, and more aggressive saving for retirement because if you think a million is enough to retire on think again! We only go to the doctor for the covered wellness checks. We have to pay a 3000k deductible which is typical. We do give an amount to church which is a sacrifice for us...but nothing close to 10 percent. 17 years ago we had a tiny wedding that we paid for in cash while idiots sniffed at our "tackiness" in not having a grand affair, and sniffed at my husband taking extra long to finish school so he could pay for it in cash, and sniffed at his clothes while he saved 14k by the age of 20 to pay for school, then only used 5000k it to buy a small used car---while breaking his back working UPS and Mc Donalds. This is what many responsible people do, while other scheisskophs borrow and buy and get into huge debts thinking they deserve to act rich. Sorry but you can only afford 1.5% of your income on a house price. Save up the other 100 thousands if you can't afford that. While many people like to pretend to be rich in a big house, responsible people plan for the unexpected: job loss, disability, sickness, medical costs, home repairs, death...they don't yell WHEEEEEEE when banks offer to loan them tons of cash---we were approved for a mortgage loan of $565,000!!!! we took out 150k....because that's what normal people can afford. The bank doesn't give a damn if you can't pay you other bills as long as your mortgage is paid.

Yeah...really...I am sitting on a boatload of cash and I love to buy crap for the family and wear shitty goodwill and shop Aldi....guess again...

TerryN said...

I have zero respect for hacks like Strupp who stand by their partisan lies even when faced with facts.

Had your benevolent government stayed out of the mortgage lending industry there would not have been a crash of 2009.

Would it have manifested itself in a different way, place, time? most definately, that's how markets work but it wouldn't have been so disruptive.

Now go ahead and and take some out of context point and make that the reason everybody who disagrees with you is "foaming at the mouth" crazy wrong.

Dad29 said...

if you think CRA is the front and center cause of bad bank loans made by the majority of the banking industry in the last 10 years you aren't seeing the big picture

That's not what GOR said, Struppster.

Look at the pertinent comment, where he SAID that 'other banks were perfectly willing' to take the income opportunity--that is, that there WERE bad bankers.

No one disputes that. But in fact, CRA was the first crack in the door. It was the progenitor, so to speak.

We DO agree on the rest: standards went to hell, the I-Banks did bad stuff, the brokers were pigs, the borrowers lied like hell, and Barney covered Fan/Fred--AND enabled them--AND forced them--to back the crap.

Deekaman said...

We are more than happy to blame banks, mortgage lenders and the government. But we forget that greedy consumers were also part of this. Not only did they buy a house they knew they couldn't afford, but they took a "second" to finance the boat and truck. I'm not terribly sympathetic to any of the parties. They all got greedy and all should be paying a hefty price.

GOR said...

Right Dad, I wasn’t saying CRA was the only culprit but it started a process based on the mantra put out by politicians and activists that “everyone has a right to own their own home”. So when banks were being strong-armed to make more mortgages to people who were borderline or couldn’t meet the normal requirements, other ways were found to give them the opportunity and meet lending goals. So we got ARMs, then 10% down, then 5% down, then nothing down (“100% mortgages”) just to qualify people. Then there was selling mortgages on the secondary market (unheard of years before) – either entirely or selling the paper, but keeping the servicing. Then the investment bankers got into the act with ‘re-packaging’ and the rest is history.

When my wife and I took out our first mortgage the requirements, if memory serves, were:

1. 20% down and if you didn’t have 20% you had to take out ‘mortgage insurance’ (I think this was challenged later as ‘discriminatory’). But at minimum you had to have 10% down.

2. Your monthly mortgage payment had to be less than 28% of your income and your total recurring debt (Credit card pymts, car loans, etc.) not more than 35% of your income.

3. You had to show proof of employment and stability of employment.

4. You had to have homeowner’s insurance and possibly supplemental insurance if your house was in a ‘flood plain’.

5. You had to have a demonstrably good credit history.

Inability to meet those conditions meant: forget about owning a home until you can afford it. Were there bankers who cut corners? Yes. Were there pressures to ‘make the numbers'? Yes. Then the brokers and ‘mortgage originators’ got into the act and mortgage lending became like used-car sales (“No credit? No problem” and “Have I got a deal for you!”).

Underlying all of it was greed – both on the part of the sellers and the buyers – either to make more money or to ‘have it all’ when you couldn’t afford ‘it all’. And while any loan documentation is complex and needs to be studied carefully, I have little sympathy for people who now lament that they “didn’t know”. Some maybe didn’t or were misled but not everyone - and there is an issue of personal responsibility here. As the saying goes: You don’t buy a pig in a poke.

Dad29 said...

while any loan documentation is complex and needs to be studied carefully, I have little sympathy for people who now lament that they “didn’t know”.

In the Good Old Days, a buyer would hire an attorney to review the documents--making sure that there were no traps/tricks in store for the buyer. (You probably recall the famous Clark Building document "Ooooops!")

That changed, too. Buyers no longer hired their own attorney; they tended to trust the bankers, especially if the bankers were giving them 110% of the home's value.

Not smart. As it turns out, downright stupid; but then....

neomom said...

I don't have much sympathy for those that didn't "know" either....

Anybody with half a brain knew that home values couldn't continue to rise as they had been in comparison to wages. The fact that so many of these McMansion owners didn't have any furniture means they knew they were living on the edge of their financial viability anyway.

I also don't think that these documents should be that complicated either... you have principle, interest rate, amortization/payment schedule, payment amount and your penalty charge for a late payment. Why does that take 50 pages?