Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : Booms, Busts, and Recoveries -- Ignore unavailable to you. Want to Upgrade?

To: smolejv@gmx.net who wrote (17871)	4/5/2002 3:40:39 PM
From: AC Flyer	Respond to of 74559

DJ: You are taking the glass half-empty perspective. You have lots of company. I don't expect to persuade you, but in response to your specific points: >>From my perspective the two key factors seem to be credit-based spending (big time)<< Consumer credit outstanding as a percentage of income is at the upper bound of its historical range, to be sure (~22%, as I recall), but it is not at a level that can be considered extraordinary. Expanding consumer credit goes hand-in-hand with a growing economy, but this just seems to be something that the neo-Puritans can't get comfortable with. >>Including or excluding hedonic stats<< This particular buzzword has been grossly overused. The great majority of manufactured products cost less than they did last year when they cost less than they did the year before that. The government productivity numbers are, for the most part, real. Denying this is flat-Earth superstition. >>How should I understand these numbers in view of the sharp drop (to negative) in US households' savings rates. Is it not something like -6%? IOW 3 years of income increases (all other things staying equal) spent in 2001/2002.<< You should view this as an 8% increase in disposable income, financed by gains in home equity. (However, I believe that the US savings rate recently turned +ve). In any case, negative savings financed by household balance sheet manipulation, while not healthy in the long run, is positive in the short run. If you believe the short run can be measured in months, this is a bad thing. If the short run can be measured in years, as I believe, then it's a good thing. Just don't be left holding the bag when the music stops.