As Tom has set the tone already, how’s about some more economics?

This one’s even bleaker than the prospect of another bubble in the pipeline: John Robb explains why the consumer recovery being trumpeted desperately by newspapers everywhere is, at best, wishful thinking:

The driver of this fragility is that 75% of a typical American families budget (not counting education costs of kids) is dedicated to fixed expenses. This means that the loss a small as 10% in a family’s income would be sufficient to force failure. Combine this fragility with increasing income volatility and even the slightest shock will set off a wave of extreme frugality and mushrooming financial failure at the household level. In the past, we were able to hide this fragility through increased debt/bubbles. That’s over. We’ve already taken on as much debt (375% of GDP right now, and still climbing) as we can acquire and the banks are hoarding the bulk of federal cash infusions to paper over their insolvency (almost all of the toxic assets from last fall’s debacle are still in place, and more are en route from commercial real-estate).

Part of me would like to think Robb is wrong, but his ideas – and those of other outsider analysts like him – have the ring of truth about them, simply because they’re the only people who aren’t telling us what we desperately want to hear (which just so happens to be what governments and economists want us to believe).

Meanwhile, TomorrowMuseum points to an article at the Wall Street Journal that attempts to “remove the stigma of bankruptcy“:

As long the economy stays grim, bankruptcy filings will become increasingly common – which may diminish the stigma that accompanies bankruptcy. It is, in a sense, surprising that so many Americans should still feel ashamed of bankruptcy when those in a far more comfortable situation feel no such chagrin. Corporate bankruptcies are an accepted part of doing business from Wall Street to Silicon Valley. Executives who collect $30 million from a bank in the years before it collapses are not expected to give it back.

Most striking to me as a European, though, is this bit at the beginning of the essay:

… too many people are talking about bankruptcy as if it’s a sign this country’s social safety net has failed. It isn’t. Bankruptcy is part of the safety net. Other countries have welfare states, America has bankruptcy.

Now, I’m no economist, I’ll freely admit… but from where I’m sat that sounds like something the Queen of Hearts might have said if Alice in Wonderland had been a satire on economics. Either that, or a contender for Panglossian statement of the decade. [image by quinn.anya]