Readers suggested a topic on personal consumption and the economy. "When is this recession going to get here? Gas prices are going up, housing market is in the dumps and there beginning to have major job layoffs. The ever resilent consumer keeps spending, something is gonna have to give here soon."

A reply, "I think that depends on the degree to which mortgage equity withdrawal (MEW) lead or lags the consumer spending that it supports. Do people borrow against the house and then go out and buy the Escalade, or do they use the money to pay off maxed out credit cards?"

"As MEW dries up, is this future spending that they’ll have to forego, or past spending that they’ll have to pay high rates on? The degree of each will affect the timing and degree of the consumer spending slowdown, and the likely recession that it leads to."

"Early on, it looks like it’s the big ticket items (cars etc.) that have been affected. It will probably take a while for moderately profligate consumers who are living beyond their means on their credit cards hit their credit limits and can’t use a REFI to roll their debt into their mortgage."

"How long it takes before they burn through all their available credit depends firstly on their burn rate, and will later be affected IMHO by credit contraction, which we haven’t seen."

One asked, "How can you tell a recession is not already here, but just unreported?"

A reply, "Exactly. I work at the ground level of the economy these days, at a nonprofit that assists those with low to moderate incomes. This month alone my clients have included an aerospace engineer, an orthotist, several software engineers, and a hydrologist, not to mention countless realtors, two mortgage loan officers, two furniture sales people–both of whom were earning in excess of $100K before the housing bust; and a new car salesman."

"All are either newly unemployed or marginally employed (significantly reduced income due to lack of sales). They all report that they are currently living off of their savings. I’d say that the recession is here."

To which was said, "At least your clientele apparently had enough sense to save some money for the lean times. It bodes ill for the rest of the national economy that the national savings rate has recently remained in negative territory for the longest period since the 1930s."

From Money Magazine. "Newlyweds Erik and Brandi Quam can't really afford their home. The monthly carrying costs on their two-bedroom condo in Arlington, Va. run about $2,500 a month, and they fear the bill could go higher still as their adjustable mortgage resets to higher interest rates. It's already a tight squeeze: They've taken in a roommate to help pay the bills."

"Unfortunately, they can't afford to sell either. Thanks to a falling housing market and a prepayment penalty of about $11,500, they'd owe the bank more than their place is worth. The irony is that the Quams should be able to afford their place: It cost just $219,000 when a still-single Brandi bought it."

"The primary mortgage on the Quams' condo was fixed at 5.25 percent, but Brandi had also taken out a smaller variable-rate loan. As rates rose in 2005, she went looking for a better deal."

"Shortly thereafter, she says, she got a call from broker Robert Hoover of CPA Mortgage in Maryland. He found her a new loan with what she says she understood to be an initial 1 percent rate, with only small increases in the first five years. And since she had equity (her condo had appreciated), she could even take a little cash out to pay off some bills. The transaction earned the broker and his firm about $12,600."

"It took a few months before Brandi realized what she had done. The mortgage was something called an option ARM. It was true that Brandi could make initial minimum payments of about $800."

"But those weren't enough to cover the interest she was actually being charged, which was higher than the rate used to calculate required payments. The unpaid interest was added to the loan balance, a phenomenon called negative amortization."

"Barring a market turnaround, they're stuck for at least another year and a half until the prepayment penalty phases out. They've had to turn down job offers because they can't move."

"Who is to blame here? Yes, Brandi should have asked more questions and scrutinized the fine print. The idea of a mortgage with a 1% rate seems, on its face, too good to be true. Brandi says she did know she'd eventually have to make higher payments, but she planned to move before that happened."