. . . I was dubious of calls that the US consumer would capitulate, especially those by Stephen Roach, who I have a great deal of respect for. At the time I just didn't see a catalyst. There wasn't anything in the near term that looked like it could knock-off the effect of the refi-ATM machine. If the oil spike couldn't do it then only two things in my mind might be able to do: a financial crisis a la the wreckless unwinding of the carry trade or the exhaustion of the equity bubble. Guess which one it was?
Today, however, it looks like the consumer is going to give up pretty soon. What, with million dollar mortgages being foreclosed, folks making more than $100k having mortgage issues and the ongoing sub-prime meltdown? (These don't take into account rising energy and food costs, either.) Looks like a perfect storm to me -- and others.
The results? Recession, most assuredly, perhaps a deep one. The economy has to work off all of its excesses. Hopefully the Democrats will take advantage of it.