The Perfect Antidote

For all those policymakers, "economists," and TV pundits whose thinking has been clouded by the "green shoots" they've been smoking lately, I've got the perfect antidote: Howard Davidowitz.

In fact, if the reality described by this retail industry consultant in the following Yahoo! Finance Tech Ticker column (and accompanying video). "'The Worst Is Yet to Come': If You're Not Petrified, You're Not Paying Attention," doesn't sober these delusiabulls up quickly, I'm afraid nothing will.

The green shoots story took a bit of hit this week between data on April retail sales, weekly jobless claims and foreclosures. But the whole concept of the economy finding its footing was "preposterous" to begin with, says Howard Davidowitz, chairman of Davidowitz & Associates.

"We're in a complete mess and the consumer is smart enough to know it," says Davidowitz, whose firm does consulting for the retail industry. "If the consumer isn't petrified, he or she is a damn fool."

Davidowitz, who is nothing if not opinionated (and colorful), paints a very grim picture: "The worst is yet to come with consumers and banks," he says. "This country is going into a 10-year decline. Living standards will never be the same."

This outlook is based on the following main points:

• With the unemployment rate rising into double digits - and that's not counting the millions of "underemployed" Americans - consumers are hitting the breaks, which is having a huge impact, given consumer spending accounts for about 70% of economic activity.
• Rising unemployment and the $8 trillion negative wealth effect of housing mean more Americans will default on not just mortgages but student loans and auto loans and credit card debt.
• More consumer loan defaults will hit banks, which are also threatened by what Davidowitz calls a "depression" in commercial real estate, noting the recent bankruptcy of General Growth Properties and distressed sales by Developers Diversified and other REITs.

As for all the hullabaloo about the stress tests, he says they were a sham and part of a "con game to get private money to finance these institutions because [Treasury] can't get more money from Congress. It's the ‘greater fool' theory."

"We're now in Barack Obama's world where money goes into the most inefficient parts of the economy and we're bailing everyone out," says Daviowitz, who opposes bailouts for financials and automakers alike. "The bailout money is in the sewer and gone."

Comments

[roger]

World competition grew enormously after world war 2 and they had the advantage of cheap labor
American manufacturers cut corners & the quality deteriorated badly,before you knew it imports dominated
and we became a service economy,the need for credit became overpowering,finance sector was only to happy
to oblige with gusto from this sprang speculation and the likes of Maddof,i'll spear you the mad speculation in the
housing market,the chumming on wall Street etc....etc...brief a TOTAL MESS!
So tell me mr.Davidowitz which is the the efficient part of the economy and your plan is????? the future of this economy is very dismal & the measures taking will not fix it agreed on that

[Dee]

Look who's having a meeting?

http://www.haaretz.com/hasen/spages/1085589.html

Such a muddle in msm goings in various countries. Conspiracy? Don't know but it sure it fun speculating.

[tjo]

I just noticed the "green shoots" are artificial foliage; nothing is actually growing.

The fundamental problem with this country is too much debt, which cannot be solved with more borrowing.

Enlightening interviews with Howard Davidowitz! Good to hear the unfiltered facts without the usual political spin.

[John66]

At what point will people finally stop paying on their debt? The Titanic is sinking. We're headed for a world where a credit rating is irrelevant. Don't people see this? Think of all those things that you think you need credit for--a house, a car, a college education and luxury items at the shopping mall and ask yourself, is there any other way that you can get these items without credit?

A house could easily be replaced by a rented apartment or a mobile home that you could save money for. They could say that people who don't pay their bills on time would find it hard to find an apartment. So, we're just going to have people who have money to pay for rent and are working just live out on the street because they didn't pay their light bill five years ago? Right.

What's wrong with moving closer to work, walking, a bicycle or public transportation?

I happen to think that I shouldn't have to pay for a college education. I think that should paid for with tax dollars.

And do you REALLY need to buy luxury items at the shopping mall?

So you see....we don't need credit to survive. All of this credit was introduced into the economy as a means to help facilitate globalization. The long credit-fueled consumer binge in the United States has helped to give billions of jobs to third world countries, but it has also perpetuated the stagnant wages that has existed in the American economy since the 1970's. We now have people in Walmart making low wages helping to sell items that are made by people...making low wages. You only get what you give. This is the future.

So consumers should stop worrying about the fine china. The Titanic is sinking and it's only a matter of time before the rumors are confirmed. Consumers should stop trying to save their credit record because we're headed for a world where a credit rating is irrelevant.

http://stoppaying.blogspot.com

[bobn1955]

OMFG! Jackie Mason, as economist!

Not that I disagree with the main points - we are are well and truly screwed, and Obama is making it worse.

[dazza]

stop buying