Who hasn’t dreamed of shipping their folks down south for the remainder of their “golden” years? I know I have! Unfortunately with the current state of the economy, we’re all too happy simply keeping a roof over our own heads. Until now…
“Today’s chart is pretty self-explanatory. It’s the price of a single family house (with data from RedFin) in Palm Springs, CA. Watch it do a round trip from 2001 to 2009. The dip started in 2008, and we took a stab at what that buyer was probably thinking. (via PlanetMoney)”
With that said, never again will we struggle with the George Costanza dilemma of “If they go, my inheritance goes with them, but I’m happy. If they stay, I’m rich, but miserable.” For the annual cost of putting them up in some fancy retirement community, you can now afford to buy them one in Palm Springs California.
Consumers are not buying homes, because they expect house prices to be lower one year out. Not surprising, when you consider that home prices have fallen in 80 cities.
It’s not just housing anymore: shoppers fear buying prepaid gift cards from retailers due to the threat that they might go broke. It’s more than a threat: Circuit City has filed for bankruptcy.
Automakers are trolling on Capitol Hill (and YouTube) asking for mercy and, oh yeah, $25B in bailout money from taxpayers. Consumers have already shunned Detroit’s cars, this is why they’re in this mess, but with the specter of bankruptcy, sales will fall even more.
Consumption has halted to a screech, no doubt, with a 1% growth in online commerce, which last year at this time was growing 17% year-over-year.
Add it all together (or subtract it all together) and you have a 2.8% decline in consumer prices.
The Dr. speaks:
- The U.S. will experience its most severe recession since World War II, much worse and longer and deeper than even the 1974-1975 and 1980-1982 recessions.
- The prospect of a short and shallow six- to eight-month V-shaped recession is out of the window; a U-shaped 18- to 24-month recession is now a certainty, and the probability of a worse, multi-year L-shaped recession (as in Japan in the 1990s) is still small but rising.
- Obama will inherit an economic and financial mess worse than anything the U.S. has faced in decades: the most severe recession in 50 years; the worst financial and banking crisis since the Great Depression; a ballooning fiscal deficit that may be as high as a trillion dollars in 2009 and 2010; a huge current account deficit.
- The world economy will experience a severe recession.
- The advanced economies will face stag-deflation (stagnation/recession and deflation) rather than stagflation.
- Expect a few advanced economies (certainly the U.S. and Japan and possibly others) to reach the zero-bound constraint for policy rates by early 2009.
On the bright side, well… scratch that. Read more here. If “doom” could be a tag, I’d tag this post as such.
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