Main Street Struggles While Wall Street Seems Oblivious

Hey everybody, did you know America’s economic problems are all over? That’s right, kiddies, after a week of stories revealing a continually worsening housing market, continued job loss, soaring prices and plunging consumer confidence, Wall Street is indicating the worst is over.

Just watch CNBC for a few minutes as pundits take turns pummeling any analyst who says, “But what about those folks struggling on Main Street?”

You see moms and dads, the economy isn’t really about you and me. It’s about oil and commodities and credit. Think I’m kidding? Check out this New York Times story:

Many on Wall Street, the epicenter of the credit mess, seem to think that the worst is over. For the first time in months, analysts and executives sound upbeat again. Many of them see a broad, sustained recovery in both the economy and the financial markets coming in the second half of this year, a prediction some market strategists call hopeful at best.

Why the constant drumbeat of happy news when most of us are trying to find affordable housing or considering whether to give up bread or cheese? Because in America, telling people that they are happy is a proven formula for success. Most of the time, anyway.

And certainly, the bigwigs in government and business don’t want you thinking too much about the monumental problems we face everyday. Problems such as these:

Consumers are losing confidence in the economy as their homes lose value at the fastest rate in two decades. NYT

The American economy lost 20,000 jobs in April, which is the fourth consecutive month of declines. The number would have been worse if not for service and government jobs taking up the slack from manufacturing. NYT

Home prices are dropping at an accelerating rate as foreclosures continue unabated. Take a look at the home price chart. CNN

Pinched consumers are being forced to spend more money on food and gas while giving up on discretionary purchases. NYT

Americans are dumping their gas guzzlers – we’re stuck with our minivan for now – in favor of tiny fuel sippers. NYT

The high cost of and demand for petroleum is causing worldwide shortages of fertilizers. Even farmers in Iowa are struggling. NYT

Hey, even the Europeans are suffering. NYT

I could go on and on and on.

Perhaps more important than what is happening now to the American consumer is what may be coming down the road:

• Expect medium and high-end housing markets to be hit by the foreclosure wave soon. Folks in these categories may have more resources, but the reaper is catching up. Americans are expected to lose on average $85,000 in wealth this year alone.  Bloomberg, LAT
• As more and more retirees start hitting up the government for Social Security and their 401ks and IRAs for cash, expect additional downward pressure on the markets. NYT
• Expect medical costs, even for the insured, to continue rising. NYT
• Expect financial firms to suffer huge write-downs as Americans default on credit card and other forms of debt.

My theory is this: Positive spin and wishful thinking will go a long way to buoy the markets. That and the fact the Federal Reserve has flooded the system with cheap cash.

But in the long run, money will stop moving as Americans simply run out. They can only take on so much debt or continue to pay jacked-up prices. It may take one, two or even three quarters, but sooner or later, American consumers will collectively throw up their hands. And when that happens, the markets will finally understand what’s really happening on Main Street America.

Comments

[Ken]

Corporate and media hype is what creates these situations in the first place. I'm for more government control and more control of government.

[brettdl]

I agree that media hype creates a lot of these problems, but all to often the government seems in cahoots with big biz.