The U.S. economy is experiencing a significant contraction as U.S. consumer spending continues

to decline. Housing prices have plummeted as the rate of both residential and commercial

mortgage delinquencies continues to increase. At the end of the first quarter of this year, nearly

nine million borrowers held mortgages exceeding the value of their homes, and this number is

expected to increase significantly. The U.S. economy shed 80,000 jobs in March according to the

U.S. Department of Labor, the largest loss in five years. Average U.S. household debt is 85%

higher than in 2001, and continues to increase as consumers take on greater levels of debt in

response to rising commodity prices, particularly food and energy costs. Delinquency and default

rates for credit card debt, automobile loans and student loans continue to rise rapidly, as

delinquencies have increased from less than $300 billion in 2005, to $715 billion in 2008;

representing an increase of nearly 150% within 36 months. The present economic stress will likely

be compounded by an expected record number of bank failures. U.S. consumer spending is

predicted to continue to decline as consumers experience increasing commodity price inflation and

credit contraction.

In a report dated May 19


th, Oppenheimer analyst Meredith Whitney warned