Skip to: Content
Skip to: Site Navigation
Skip to: Search


The Daily Reckoning

Wishing you'd bought stocks? Don't bother.

Looking at rising stocks, it's easy to think that the economy's recovering. But the facts simply don't support such a fantasy.

(Page 2 of 2)



But getting a clear picture of the economy is hard.

Skip to next paragraph

Recent posts

Here’s another Bloomberg report that tells us something interesting. A good part of current consumer spending is not coming from an economic recovery; it’s a by-product of the fall in housing prices:

May 6 (Bloomberg) – Melissa White and her husband stopped paying their mortgage in May 2008 after it reset to $3,200 a month, more than double the original rate. That gave them extra cash to pay off debts and spend on staples until their Las Vegas home sold two years later for less than they owed.

“We didn’t pay it for about 24 months,” said White, who quit her job as a beautician during that period after becoming pregnant with her first child and experiencing medical complications. “What we had, we could put towards food and the truck payments and insurance and health things I was dealing with.”

Millions of Americans have more money to spend since they fell delinquent on their mortgages amid the worst housing collapse since the Great Depression. They are staying in their homes for free about a year and a half on average, buying time to restructure their finances and providing an unexpected support for consumer spending, which makes up about 70 percent of the economy.

So-called “squatter’s rent,” or the increase to income from withheld mortgage payments, will be an estimated $50 billion this year, according to Michael Feroli, chief US economist at JPMorgan Chase & Co. in New York.

Add/view comments on this post.

--------------------------

The Christian Science Monitor has assembled a diverse group of the best economy-related bloggers out there. Our guest bloggers are not employed or directed by the Monitor and the views expressed are the bloggers' own, as is responsibility for the content of their blogs. To contact us about a blogger, click here. To add or view a comment on a guest blog, please go to the blogger's own site by clicking on the link above.