[StBernard] "Worst Is Yet to Come:" Americans' Standard of Living Permanently Changed

[Westley Annis]

"Worst Is Yet to Come:" Americans' Standard of Living Permanently Changed
Posted Feb 17, 2009 12:53pm EST by Aaron Task in Investing, Recession

There's no question the American consumer is hurting in the face of a burst
housing bubble, financial market meltdown and rising unemployment. 
But "the worst is yet to come," according to Howard Davidowitz, chairman of
Davidowitz & Associates, who believes American's standard of living is
undergoing a "permanent change" - and not for the better as a result of:

An $8 trillion negative wealth effect from declining home values.
A $10 trillion negative wealth effect from weakened capital markets.
A $14 trillion consumer debt load amid "exploding unemployment", leading to
"exploding bankruptcies."
"The average American used to be able to borrow to buy a home, send their
kids to a good school [and] buy a car," Davidowitz says. "A lot of that is
gone."

Going forward, the veteran retail industry consultant foresees higher
savings rate and people trading down in both the goods and services they buy
- as well as their aspirations. 

The end of rampant consumerism is ultimately a good thing, he says, but the
unraveling of an economy built on debt-fueled spending will be painful for
years to come.