I own a business. I see first hand what the recession has done to people’s spending habits.

They have become frugal and are spending less on everything and buying only essentials.

http://www.newyorker.com/talk/financial/2009/10/12/091012ta_talk_surowiecki

“Americans have been spending less because they have less money to spend”

http://www.cnbc.com/id/31102428

“Consumers to hoard their money and limit spending to all but the essential purchases.”

So to answer the big question is “how sustainable is this recovery”? My answer is “the worst is yet to come”. Right now commercial loans are failing at a rate to make the last round of residential mortgages look like a pimple on my face.

The Catastrophe For Banks Right Now: $3.5 Trillion In Commercial Real Estate Debt.

http://247wallst.com/2009/05/24/the-next-catastrophe-for-banks-3-5-trillion-in-commercial-real-estate-debt/

Why haven’t these losses shown up on the bank’s balance sheets? The same reasons why the residential mortgages didn’t show up the first time. Banks still think their investments are still worth something and haven’t written them off. Besides they’re using TARP funds to camouflage losses.

Here’s what really worries me. There’s a 2nd round of $2.4 trillion of ALT-A residential mortgages to reset in in 2010 and 20-30% will default. Consumers will have even LESS $ to spend.

http://www.marketoracle.co.uk/Article11001.html

If the employment picture doesn’t improve (which it won’t) we won’t be talking the Great Recession any longer….it will be the Great Depression II. We just never learn from our past mistakes.

- Jamme

Related Posts:

• Check out the story on Bloomberg on Opel looking to slash price 40% to keep up production.
• The market is calling for a rough 2nd half to 2010.
• German investor confidence down again in December
• Is Du Bai that story that is supposed to go away quickly?
• Hard to disagree with any of these points about the coming double dip recession.

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