Ok, I want to knock this discussion out as I've spoken about it for years, to crowds and to friends, yet it has not been focused on and continues to be a great risk to the American economy.
Beginning in the mid 80's Japan saw an economic boom. Many of my peers believed that the Japanese had bought up many of the large commercial buildings and properties in America.
Perhaps the buying frenzy was over stated, but the boom was real and it appeared to be, in great part, backed by government overvaluated collatorization.
1990 began a trend that was eventually seen as a great bust. The Japanese Economic Bubble Burst! They effectively lost the next 10 years of economic and industrial forward movement as they struggeled with living through and surviving this horrible economic downturn.
In many ways, the following approximate 10 years bringing you to today, have also been a struggling period of very little advancements in their economic condition, hence since the Great Bust, they have lagged for almost 20 years and may finally be poised to begin making headlines in the world again.
Now for America. Wow! If you don't know there's limited cash in the homes of Americans, you're living under a rock!
The recent catastrophe which captures everyone's attention today is A Bubble, but not The Bubble which WILL set our economy on a path which may, like Japan, put us in a lagging mode to the worlds economy for 20 years. However, as This Bubble still remains hidden, the When remains the question.
On the Current Situation.
Yes, the economy as a whole in America is in very bad shape with most American facing extremely limited cashflow in the home.
This limited cashflow forces them to make decisions of what bills to pay, and as the money continues to shrink, they begin to stop making payments on their car, their home, insurance, etc., focusing on food and clothing.
Sounds extreme, but that's what is happening.
America woke up!, or atleast the government did when AIG, Fannie Mae and many banks threatened to fold. A crisis of gigantic proportion demanded the governemnt involve themselves in saving the economy.
False Focus. The government, and the world, viewed, and chose to focus on the corporate world which threatened failure. Throwing money to these corporations to save them seemed to be a quick fix but in reality is less than a bandade.
Point, after the government gave the money to the banks, corporation, and now the automobile manufacturers, those companies now exist for a few more months.
Pay attention, they reached this crisis of eminent failure as their income came to a screaching halt.
Income came to a screaching halt because the average American, being forced to make hard decisions, stopped making payments on mortgages, loans, and stopped making major purchases.
Average Americans made these decisions due to increasingly limited cashflow in the home.
Don't miss this.... If you bail out Company "A" with billions of dollars, allowing them to live for a few more months, on Monday Morning, the Average American is still unable to make those loan and mortgage payments, hence, the income and cashflow of Company "A" continues to diminish and the money received from the government eventually dries up, leaving them in the same place.
So, the bail out, as done in the Fall-Winter of 2008 by the US Government does not solve the problem or turn the economy around.
Meanwhile, during the last 3 months of 2008 with more and more people out of work, every month having basic food, water, and clothing needs but no income, credit scores of formerly rich people drops quickly and the average American not only has little or no cashflow in the home, but they have a credit score reflective of the conditions.
Jobs... if they get jobs, they will mostly be unable to borrow money again due to credit damage.
Now that the situation is stated, let me tell you of The Bubble which has yet to be seen or addressed.
The Bubble is the Debt or Loan Bubble.
What the world does not know, and even Americans are blind to....
In America, average rural town, every student in the high school must own their own car and it must not be an old car. In most cases, when they turn 16 they receive this car.
Now the Mother and the Father each have a car, a car payment, and full coverage insurance.
They work fulltime.
They borrow more money to buy their child a car. They now make another car payment and full coverage insurance.
Most people I know have several children, see the problem?
Also, if you pull up to the average home, you will see 3 to 4 cars, a boat or jet ski, a couple all terrain vehicles. In the home are atleast 3 laptops and two desktops, nintendos, playstations, wii, and every game imagineable.
4 Credit cards maxed out and a line of credit on the home.
Cable or sattellite tv, internet access, 4 or more cell phones, house insurance, car insurance on every vehicle.
Weekly gas bill of $300 to for everyone to drive to work and school.
Food, clothing... the list goes on!
And that's for the ones which established credit and borrowed on credit cards, cars, and homes.
A mother and father working full time do not earn enough money to stay on this road.
They got on this road by borrowing.
A mother and father which have ONE CAR, One Cell Phone and their child rides the public bus to school, with NO Cell Phone is considered poor. The student is shunned by others that enjoy these lavish pleasures.
Here it is... Look at an American family and on the Outside, we have the appearance of Success and Wealth. But on the inside, we are in Debt.
Just like the Japanese which had loans based on a false valued collatorization of the government, we are falsely valued. We look rich, but are in debt.
The bubble burst in Japan and reality struck.
In America A Bubble burst in the corporate world with limited cash comming in from the public to sustain these corporations, but... The Bubble still exists in the homes and for some, are deflating quickly.
Christmas and Birthdays are debt overload dates. Americans will use credit cards and savings to purchase things for friends and family in order to show their care, love, or consideration, further deepening the cycle.
In America, our homes Are a Bubble, ready to Burst.
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