People can be ided into three classes, it has been said: haves, have-nots, and have-not-paid-for-what-they-haves. The size of the third category may be the biggest single source of vulnerability for the US recovery.
A stress test of the consumer could reveal more distressing results than the one conducted on banks.
Debt is at high levels - 130 percent of disposable income. A slide in net wealth has reduced the collateral Americans can draw upon for emergency loans. It is now harder to borrow money for new consumption or to roll over existing debt.
Like a compromised immune system, this weakness makes consumers extremely susceptible to further shocks. Traumatic as the recent bout of retail restraint may have felt, worse may be in store. After all, consumption rose by 18.5 percent in the seven years to 2008. So far, it has fallen back by less than 2 percent.
Several potential mishaps could swiftly undermine consumer spending and set the recovery back. Among the most likely …
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Tags: Banks, Business, consumer, debt, finance, loans, money
