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Strategies & Market Trends : Mu Gamma Lambda -- Ignore unavailable to you. Want to Upgrade?

To: Augustus Gloop who wrote (2235)	7/18/2001 12:31:29 PM
From: MulhollandDrive	Read Replies (1) \| Respond to of 10077

From the article.. >>The growth of lending has been so far in excess of the growth of disposable income that there has been a very rapid rise, again to record levels, in the ratio of private debt to disposable income, illustrated in Chart 3. Although the flow of net lending fell back quite sharply in the first quarter of 2001, it was still fast enough to bring about an increase of the debt/income ratio to 1.69, as compared to 1.49 at the previous peak in the fourth quarter of 1989. Chart 3 Chart 4 shows the breakdown of the private deficit between the personal sector and corporations. It was the behavior of the personal sector that was truly exceptional. Starting from a surplus slightly above normal, by the end of 2000, the financial balance of the personal sector had fallen to a record minus 4 percent of GDP (minus 5.6 percent of disposable income) and continued to fall in the first quarter of 2001, well after a major slowdown in the economy had become manifest. There has also been a large fall in the financial balance of the corporate sector, but no more than normally occurs during cyclical upswings. It is noteworthy that there was an upturn in the corporate sector's financial balance in the first quarter of 2001-- the counterpart of the fall in investment, which (using current prices and an annual rate of change) was down nearly 20 percent from the previous quarter, mainly because of the steep decline in inventory accumulation.<< I see this as a red flag. The expectation is that the consumer will spend the economy into recovery. With what? more debt as consumers see their net worth in decline? what happens as the inventories are worked down and demand remains weak? Ponderables.