And like good Uhmerikan consumers, they are addicted to shopping and spending.

It's amazing how much people with no money are willing to spend on things. I know people that have very low incomes and mountains of debt, yet they still go out all the time, they still buy things they don't need, etc. Interestingly, these people were all raised approximately middle class--they just don't know how to give up the lifestyle.

Interestingly, these people were all raised approximately middle class--they just don't know how to give up the lifestyle.

Most people born after WWII were trained in the new American lifestyle, which was about the American Dream being universally available. At first, the idea included "...to those who work hard and save." Then came TV, and credit, and more sophisticated advertising and marketing. Ultimately the middle class began to feel that they were entitled to their lifestyle, which included not only prosperity but also increasing prosperity.

Saving for a rainy day was old-fashioned, you know, that's what the grandparents who went through the Great Depression used to say. Now the business cycle was tamed and there would be no more booms and busts, and certainly never a deep recession. After all, this is America, it's the American Dream, right?

"This is the lifestyle most were trained to."

Yup. To be the backbone of the "consumer" economy. They just forgot the consumer needs some income to consume with. They have strangled and gutted the golden goose with union busting, outsourcing, benefit cuts, and subslime mortgages.

But there is good news: Wallstreet is paying record bonuses this year!

This assumes though that they can keep their wages intact. If someone was in construction, or finance, or living off the govt dole (defense contracting), will their wages (or jobs) remain as the system melts down? Doubtful.

This is going to be painful no matter how we slice it. And I don't think Mr. Bush or Cheney will even still be in the country in 2015 to pay their fair share.

Just think, Vikings used to have to actually sail out and sack places themselves! What a bunch of chumps, all you needed was talk radio and media consolidation.

Merry Xmas ;)

or living off the govt dole (defense contracting)

Which is why I'm glad to be leaving my job. Ethical and philosophical qualms are the primary reason I'm quitting my defense job, but, after I told my boss, he confided in me that changing careers might be a good idea right now. The company is predicting 3% year-on-year funding cuts starting next year and persisting for some time. He described the last couple years as the "high water mark" of defense spending. I've heard "old-timers" in the hallway saying that their pensions are being reduced. Of course, none of us new-hires have pensions--401(k)s for all!

1. Wage stagnation not only puts downward pressure on prices but also reduces demand for goods. Dwindling worker incomes eventually mean less ability to use credit as credit lines are maxed out and payment become too great to service. Housing tops out and begins to decline, shutting off equity financing. Many consumers forced into foreclosure and many more are hopelessly indebted in every other way they could borrow.

2. Rising energy costs increase prices as they work their way through the economy, raising the cost of gas, food, and other essentials. This reduces discretionary spending, hence, further dampens aggregate demand.

3. Contraction of credit curtails demand not only by consumers but also by companies, whose inventories swell. Companies have to pay higher rates to sell their paper, and nmny companies in trouble are forced to liquidate assets at a discount or face insolvency. Discounting (sales) become prevalent but consumers are too tapped out to soak up the excess. Further discounting ensues.

4. Business does not invest in productivity owing to excess production capacity. Expansion is put on hold, and some operations curtailed. The falling dollar results in domestic inflation, curtailing domestic demand, but does not give exports enough of a push to offset it, since the US is a net importer.

5. Asset bubbles that have formed due to over-valuation cannot be "worked out" other than by discounting or even writing off completely, causing severe asset deflation in many sectors, especially structured finance. Lowering interest rates does not work to soak up the junk, which doesn't sell at any price. The wealthy, including many foreign investors, swoop in to pick up heavily discounted choice assets at bargain basement prices, "stabilizing" the market.

6. The Fed begins to loose control of the levers it uses to manage the economy, faced with the dilemma of easing too much and generating price inflation or not easing enough and risking asset deflation.

7. Populists call for government intervention to prevent a painful recession. There is no coordinated plan for undertaking this forthcoming.

8. As the dollar threatens to go into free fall and tangible value spikes, a crisis is brewing.

9. A perfect storm is in the making.

10. The media obsesses over Elizabeth Kucinich's tongue stud.