Friday, August 13, 2010

Shake the Magic Eight-Ball harder

Economists had predicted retail sales would be up and they were, sort of, car sales were up with the bounce back from Detroit and gasoline was way up but that's really a negative. Take those two off and retail sales were really down, sales of building materials, furniture, clothing, appliances and general merchandise all declined.

Consumer prices were up 0.3% but don't take that to mean there won't be deflation. With an economy based entirely on debt, deflation is the that bridge collapse nobody saw coming. Never mind the rusted beams and the eroded concrete. Everything has been hollowed out by debt, for consumers a quarter of home mortgages are under water, car loans are upside down or the car are leased with no equity to begin with and credit card debt exceeds the value of the rest of their assets. No wonder so many people cling to their religion and guns, often that's the only things they own. 

To that end there is a move in Congress to reform the Federal Bankruptcy law. The Federal law is unusual in that it allows huge variations from state to state, for example in a handful of states you can keep a certain amount of equity in your home. In Texas there is no limit, if you're "rich" but broke, go to Texas and buy a 50 million dollar house then file bankruptcy and effectively rob your creditors. Is Congress going reform the law let more people to keep a modest home and make the rich pay their debts? Not hardly, they want to make all the states allow you to keep your guns when you complete bankruptcy. Don't say Congressional conservatives don't have your best interests at heart.