Is America’s middle class getting stuck up a suburban cul-de-sac, surrounded by ‘for quick sale’ signs, with a rusting ‘commuter tank’ in the drive without a fill- up? Not quite, at least not yet, thanks to a robust global economy.
True suburban property prices are falling, foreclosures and distressed selling are on a sharp rise - albeit from low bases - and there are rising concerns about petrol and heating costs. But the suburban beat goes on. At most, 10% of suburban households face incipient crisis in the short-term.
The American middle class consumer though indebted still travels to the fry pits and big box retail stores lining the eight lane highways. And they are still spending money with that good old up tempo American resilience to jolts from the outside world. In spite of the fact that they can no longer use their homes as ATM machines by progressively re-mortgaging when property prices were going up.
Sub-prime crisis or not, the Fed will rescue the system and the American way of life will go on as always, with a few temporary tweaks and household budgetary adjustments... won’t it? After all, didn’t George Bush Snr. forcefully declare at the Earth Summit in 1992 that “the American way of life is not negotiable.” And the centrepiece of that way of life is suburbia and has been for 60 years.
Daily Reckoning
