So are we heading for another explosion comparable to 2008?
I’m not sure it’ll be an explosion. It’s more like a slow crash. It’s more like people are getting desperate. They’re having to live off their credit cards, not to buy luxuries but just simply to break even. They’re falling further and further behind, and as they fall behind the interest rate rises, the penalties rise, so people are getting more and more squeezed.
That’s why where I live in New York City, on all the big shopping streets there are more and more storefronts for rent. The stores are going out of business, especially the stores that are either mom and pops, or small well-known stores like art supply stores that have been there for a generation. Only the big chains are surviving, and even the chains are closing down, Sears and others. Entire shopping malls are going into default.
But we keep being told that this is because people are shifting to online shopping. Is that not the case?
Certainly many people are shopping online, but that’s not the real cause. The real cause is that overall retail sales are going down, because the average wage earner is only able to spend between a quarter and a third of their income on goods and services, after what’s left over from housing and taxes. The Federal Housing Authority now guarantees government mortgages up to 42 percent of your income. In New York City it’s normal to pay 40 percent of your income for rent.
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