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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory
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To: ahhaha who wrote (47938)12/22/2005 10:45:25 AM
From: el_gaviero  Read Replies (2) of 110194
 
"I claim the savings rate is higher than normal..."

and

“Most Americans have put savings into all kinds of investments.”

Bidding up the price of a house makes other houses in the neighborhood more valuable. People living in those other houses feel better off and spend more. Call this the good ole wealth effect. Also, the now wealthier people of the neighborhood let their other assets run down (stocks, bonds, money market funds, traditional bank savings account). They also borrow against the increasing value of their houses, so that over the last generation, even though their houses are more valuable, the amount of equity they have in them has fallen.

Do you doubt any of this? Does one have to go to the links in Russ’s header to pull down the relevant graphs?

The picture painted by the data doesn’t look pretty. What if the value of those housing stops going up? Also, what if reality proves inconvenient, e.g, the primordial reality of our time: the great slow, relentless ice sheet of Hubbert’s Peak now crossing the human landscape. People with their big houses located a long way down the road are going to get ground into bits and pieces by energy costs.

Ah, but not to worry says Ahhaha --- our Dr. Pangloss with attitude --- we live in the best possible of all possible worlds.
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