Is it any wonder consumers aren’t spending? Even if consumers could borrow–would they?

Look at what’s happening to consumer net worth. This chart is courtesy of the Quarterly Review and Outlook for the Fourth Quarter of 2008 by the Hoisington Investment Management Company. The money management firm (with a reputation as among the savviest bond investors around) note that monetary and fiscal policy is overwhelmed by the “unprecedented decline in household wealth… Moreover, the wealth loss is now being augmented by significant job losses and a shorter work week.”

They figure that from the final quarter of 2006 through the third quarter of 2008, the real value of homes fell $3.5 trillion. The households’ real holdings of stocks fell by $2.1 trillion. That’s a $5.6 trillion loss in total household wealth.

The firm expects the wealth loss may exceed $10 trillion when the fourth quarter figures come in. More losses are in store for 2009. Consumer spending will continue to retrench.