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Decline in Purchasing Power

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17

October 29, 2009 – Comments (11)

One thing about the blogs I read, they always dig into the numbers in a way that you just don't get or incredibly rarely get in the news.

So, looking at Market Ticker's number crunching that over some nice looking GDP numbers:

Real gross domestic product -- the output of goods and services produced by labor and property located in the United States -- increased at an annual rate of 3.5 percent in the third quarter of 2009, (that is, from the second quarter to the third quarter), according to the "advance" estimate released by the Bureau of Economic Analysis. In the second quarter, real GDP decreased 0.7 percent.

Well, when he digs the one he found that was shockingly bad is:

 

Disposable personal income decreased $20.4 billion (0.7 percent) in the third quarter, in contrast to an increase of $138.2 billion (5.2 percent) in the second. Real disposable personal income decreased 3.4 percent, in contrast to an increase of 3.8 percent.

That's worse.  A lot worse.  Disposable personal income decreased in nominal terms q/o/q by 5.9% while in real terms (inflation adjusted) it decreased q/o/q by 7.4%!  That is an enormous swing in purchasing power and not in the right direction!

No question in my mind, the people are the backbone of the economy and that's an enormous reduction in buying power.

Overall the digging into the number is very good here.  I like that Karl looks at the reports of companies that you would have to see improvements in, ie homebuilders and their suppliers, to support the numbers being put out and he says there is zero evidence that what the report says is happening is supported by the companies it is about.

11 Comments – Post Your Own

#1) On October 29, 2009 at 10:40 AM, dwot (45.58) wrote:

I'll go a step further here, government budgets are being utterly destroyed by declining tax revenue.  What bs to say there is economic growth when tax revenues are so utterly being slaughtered.

Mish has another post on that kind of thing.

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#2) On October 29, 2009 at 10:51 AM, dwot (45.58) wrote:

Something else in there, my longer term analysis was that home owners were ultimately going to be hit with an inequitable share of tax burden, and hence my position that it is best to only own as much home as you need.  This hit the homeowner with tax increases seems to be in the municipal discussions everywhere...

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#3) On October 29, 2009 at 11:33 AM, davejh23 (< 20) wrote:

"...home owners were ultimately going to be hit with an inequitable share of tax burden, and hence my position that it is best to only own as much home as you need."

I agree 100%.  We just had a property tax increase and assessments are up even if the property value has actually been cut in half.  And the increase in property taxes is only projected to cover 2.5% of the state's budget shortfall.  Property tax rates are going to continue to climb, putting more pressure on prices, and probably encouraging more homeowners to walk away from their 4000+ sq.ft. homes.  High end homes will be hit hardest.

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#4) On October 29, 2009 at 2:29 PM, dwot (45.58) wrote:

Mish has a post about the economic numbers as well...

davejh23, interesting the assessments are up.  Usually the mill rate for taxes is set based on total assessments divided by the amount of tax they need.  I am sure if some people checked back at old tax bills they would see the tax rate per $1000 of assessment probably declined when property assessments per increasing rapidly.  Although, with property values going up so much it was easy for municipalities to get extremely careless with spending.  They could keep the mill rate constant and have the budget go way up.

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#5) On October 29, 2009 at 5:57 PM, rosemanjhk (33.53) wrote:

Disposable personal income decreased $20.4 billion (0.7 percent) in the third quarter, in contrast to an increase of $138.2 billion (5.2 percent) in the second. Real disposable personal income decreased 3.4 percent, in contrast to an increase of 3.8 percent.

Is it possible that this is due to increased savings rate?  Or is that excluded from these figures?  Just wondering.....

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#6) On October 30, 2009 at 7:22 AM, degaston (99.57) wrote:

I wonder how the "super rich" in the USA making more than $7/hour are going to fare in the long run and afford their higher property taxes once the federal government takes away more of the property tax deduction on Schedule A for itemized deductions.

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#7) On October 30, 2009 at 10:16 AM, OneLegged (< 20) wrote:

The value of my house is down about 40% from what it was a year ago.  My new tax assessment is for an increase in value of 80% from a year ago.  I have a vacant lot that has  decreased in value by about 70% from what it was a year ago.  The tax assessment for that came in at an increase of 156%. 

 If my house was worth $100,000 last year.   It is worth about $60,000 this year.  This year I am being taxed as if my house is worth $180,000  . If my lot was worth $10,000 last year it is worth $3000 this year.  This year I am being taxed as it the lot is worth $20,560.   You get the picture. Lots of folks around here a bit ticked off.

 Sales tax going up.  Property taxes skyrocketing.   Registration for my work truck has more than doubled.  All of this despite the fact that there is no work.  Meanwhile Wall Street partys on at our expense.

 

+1 rec.  Karl Denninger is a good source. 

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#8) On October 31, 2009 at 2:51 AM, dwot (45.58) wrote:

Wow, where you have property it looks like taxes is a free for all...

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#9) On October 31, 2009 at 3:14 AM, AvianFlu (20.97) wrote:

similar story on my house, but not quite as bad. My taxes went from about $3,000 to $5,000 in two years. In the meantime, services have been cut back.

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#10) On November 01, 2009 at 12:59 PM, ByrneShill (78.41) wrote:

Assessment went from 100k$ to 167k% since 2005. Taxes from 1800$ to 2100$. Half of the raise due to the town I live in merging with the city.

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#11) On November 05, 2009 at 11:57 PM, dailytrend (< 20) wrote:

thedailytrend.com - coming soon! December 1, 2009

The premier stock trading site.

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