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Strategies & Market Trends : Heinz Blasnik- Views You Can Use
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To: benwood who wrote (994)5/9/2003 2:19:14 PM
From: gpowell  Read Replies (1) of 4904
 
Your original assertion was that individuals were borrowing in order to smooth out their consumption, presumably because of some wealth loss.

Instead, there has been a great credit card & refi bridge/binge to connect the standard of living from when they were "confident" to when they fully expect to be confident again.

It is more plausible, and consistent with the evidence, that low interest rates has resulted in greater net wealth to the majority of consumers. When individual’s wealth increases they tend to consume more.

Therefore mortgage holders, for instance, are not consumption smoothing to mitigate wealth loss, but rather consumption smoothing their wealth gains.

This is part of the reason why consumer spending has been resilient through this downturn and probably will continue to do so – all else being equal.
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