I was working for the art gallery back then. People were less interested in the thousand dollar paintings and more interested in the less expensive gift items. More of the people buying paintings had to do it with payment plans. Those relying on tipped income found smaller tips. At Sylvan, they took some cost cutting steps like leaving some of the lights off until the kids came in. Things may have looked good. But, the financial crisis was clearly on it's way.
Then 2008 happened. Most of the people who should never have gotten approved for mortgages went into foreclosure. Stocks dropped and the government had to take steps to help the economy. Slowly, in time, that national debt was becoming smaller.
The great economy in 2007 was a mirage. People were taking on a lot of debt. Most of that consumer spending went on credit cards that were not fully paid off each month. The adjustable mortgages were adjusted to numbers too high for the borrowers to pay, car loans went into delinquencies and a large number of people and companies filed for bankruptcy.
We are doing it again. Stocks are doing well so people are spending money. But, car loan delinquency is at a five year high. Most of that consumer spending is going on credit cards again. Are most of those bills getting paid in full each month? I doubt it. Because people are taking steps to save money again.
We record Josh's tips in a spreadsheet each night and keep the notes from past years. Tips have been down for months compared to the same week over the last two years. He broke his arm two weeks ago. But, tips are still down. People are also more likely to just pick up their own food instead of having it delivered.
It's a perfect storm. Stocks look good but, why? A lot of companies have reduced spending because of the trade war. Income is stagnant. That tax plan that helped the rich and corporations? Just like last time it added a massive amount to the national debt. Only this time, we don't have the resources to dig out of a recession like last time.
The reason they claim the economy is strong is because of consumer spending. The spending that is going strait to a credit card. 2020 is going to look a lot like 2008 at this rate. Eventually, you have to actually pay off that credit card bill. Or, file for bankruptcy. Eventually, you have to pay for that car or it gets repossessed.
An economy run by debt is a hidden recession. That is what we are in, a hidden recession. On paper, things look good. But, people are spending more then they can afford. Like 2007. We are still getting "pre-approved" loan and credit letters in the mail. By July, it will be fliers for businesses that can help you lower your debt. Like Trump, we have the illusion of a good economy because of a lot of spending. Also like Trump, that means a lot of Americans will be filing for Bankruptcy in 2020 - 2022.
Because the economy isn't actually that strong. Because income doesn't go far. People are starting to see it. You still do take out but, tip a little less to save money. You start turning the lights out more often at home to save money. People have already started these steps. Because they have already started to get the credit card bills they can't pay for in full each month.
We are supposed to learn from history to avoid repeating the same mistakes. But, this particular lesson is going to have to be relearned. When the economy appears strong because people are spending what they don't have, the fall will be hard. It's a mirage economy. Spending what isn't there. It's also repeating mistakes that shouldn't be repeated.
We are in a hidden recession. At this rate, it won't be long until we are in an actual recession.
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