So, by what magic can household debt remain high (up in 4Q 2009; apparently down in 1Q 2010), wages stay the same, and Americans spend more? It’s tough to see how this can end well for the American consumer, falling back into its old ways, but here we are.
Apparently, it’s back to business as usual for everyone involved—J.P Morgan made a killing. The keys here? They lost money on credit cards (!!) and retail financial services. Also, there’s this tidbit: “The bank revealed it was setting aside $2.3bn to cover litigation largely related to fraudulent or predatory mortgage lending.” Ah, sounds like fun. So how’d you make money, J.P.? “Chief executive Jamie Dimon placed the credit for the bank's overall profitability squarely with investment banking staff in New York, London and other financial capitals: "Our traders did a good job," he said.” Hard to lose money borrowing at near-zero, that’s for darn sure.
Anyway the point here is that the country is locked back into the same old patterns: you have debt piling up that isn’t being used to employ people (though productivity growth made nice gains) and isn’t fuelling super growth. To escape the clinging debt, the economy will have to reach a high exit velocity, which it’s shown no evidence of doing.