The American consumer is but a shadow of its former almighty self. Personal consumption in the United States expanded at only a 1.5 percent year-on-year in real (inflation-adjusted) terms in the second quarter of 2012 - and that was no aberration. Unfortunately, it continues a pattern of weakness that has been evident since early 2008.

Over the last 18 quarters, annualized growth in real consumer demand has averaged a mere 0.7 percent, compared to a 3.6 percent growth trend in the decade before the global financial crisis. Never before has the American consumer been this weak for this long.

The cause is no secret. Consumers made huge bets on two bubbles - housing and credit. Reckless monetary and regulatory policies turned the humble abode into an ATM, allowing families to extract dollars from bubbles and live beyond their means.