The Market Ticker

This guy might sound like doom and gloom, but he seems to me to know what he is talking about. Should I take all our money and put under the mattress?

http://market-ticker.denninger.net/archives/1212-Morning-Madness-Economic-Fundamentals.html

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Let's take the basics: We had a $14 trillion economic (GDP) in 2008, of which 70% is consumer spending. The rest is government and exports.

The consumer has spent two decades pulling forward demand via credit - that is, through the chimera of extracting home equity and charging up the credit cards. After the 1981 recession this really started to accelerate; prior to that point most Americans lived largely off their paychecks, rather than pulling out the "magic plastic card" any time they wanted to buy something. Checks were common as was good old-fashioned cash.

In 1981, US GDP was $3.1 trillion dollars.

In 1992 it was $6.3 trillion, a double.

In 2005 it was $12.4 trillion dollars, another double.

Doubling in roughly 12-13 years. Not bad, right?

Let's look at it a different way, this time in "current" (not inflation-adjusted, since GDP isn't) dollars.

In 1981 the per-capita income in the US was $8,476.

In 1992 it was $14,847, a 75% gain.

In 2005 it was $25,036, a 69% gain.

Notice anything?

Its not really that subtle, is it?

GDP slightly more than doubled in each of those above periods, but per-capita income lagged, and the lag rate is increasing.

How's that possible, since consumer spending is 70% of GDP?

We haven't been spending income - that is, human productivity. We're pulling forward demand to the tune of 25-30% of income through the use of credit and as we have continued to do it we have started to pay interest on interest; ergo, the amount of debt being taken on has exploded in an exponential spiral!
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And also ran across this nice pinball machine article:

http://arstechnica.com/gaming/news/2009/07/fixing-the-past-the-art-of-collecting-pinball-machines.ars