by Charles Hugh Smith
Of Two Minds
Any economy that concentrates its wealth and income in the top tier is a fragile economy.
There are two structural reasons why consumer spending will not rebound, no matter how “open” the economy may be. Virtually everyone who glances at headlines knows the global economy is lurching into either a deep recession or a full-blown depression, depending on the definitions one is using. Everyone also knows the stock market has roared back as if nothing has happened.
While most financial pundits have accepted that a V-shaped recovery is not possible, few (if any) observers have discussed two factors that will cause consumer spending to crash harder than generally expected:
1. The top 10% of households account for about half of all consumer spending, and these are the households that will be most affected by the sharp drop in assets, small business income and the shrinking of heretofore “safe” white-collar jobs in higher education, healthcare, finance, etc.