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Politics : Stockman Scott's Political Debate Porch -- Ignore unavailable to you. Want to Upgrade?

To: Jim Willie CB who wrote (6343)	9/13/2002 6:08:25 PM
From: pbull	Read Replies (1) \| Respond to of 89467

A somber CEO from JPM this week said only that things will get worse before they get better. My best guess at this point is that an oil spike caused by tension/war in the Middle East will be the catalyst. By my reckoning, the S&P 500, now trading at almost 900, should be trading starting with the number 6. You have neatly outlined the implications that would have on the dollar and the rest of the world. PB

To: Jim Willie CB who wrote (6343)	9/14/2002 6:07:40 AM
From: stockman_scott	Read Replies (1) \| Respond to of 89467

Consuming Doubts EDITORIAL The Los Angeles Times September 14, 2002 Household spending has been the economy's reliable engine, but there are troubling signs that consumers are becoming overextended. Consumers have been carrying the economy on their shoulders like a circus strongman, snapping up new houses, refinancing the old, keeping retail store cash registers beeping and polishing new sport utility vehicles parked in the driveway. But there are troubling signs that propping up the struggling economy might be hazardous to consumers' long-term financial health. The shopping spree has floated on low inflation, consumer-friendly tax policy and low-cost financing. And when consumers run out of money, they have taken advantage of the lowest interest rate levels in decades to secure home loan refinancings that free up additional cash. Consumer spending drives two-thirds of the nation's economic activity and largely has been countering the gap created by a lack of business investment. The automobile industry this year could challenge 2001, the second-best sales year on record, and rising housing prices have some economists worried that a pricing bubble is about to burst. Statistics, though, paint a worrisome picture of increasingly overextended consumers. Housing payments, when measured as a percentage of disposable personal income, are at record highs. Toss in credit cards and other obligations and consumers are spending a record percentage of their household income on debt. Homeowners who've lost jobs and missed payments have pushed the foreclosure rate on residential properties to the highest level in more than 50 years. One measure of consumer confidence is the popularity of interest-only home loans, with low interest rates for the first few years and lower monthly payments because payments initially are applied only to interest, not principal. Homeowners playing this risky game hope prices go up, so they can sell for a handsome profit after a few years of low payments. The risk is that they could also end up owing much more than their homes are worth. Billions of dollars flowing into vacation homes, Las Vegas getaways and kitchen renovations also come at the expense of college education funds, rainy day savings accounts and retirement planning. But there are signs that the "what, me worry?" attitude is starting to fade. The University of Michigan in August reported that its widely watched consumer survey uncovered more concern about lost household wealth than at any time in the survey's 50-year history. Total bankruptcy filings during the fiscal year ended June 30 hit 1.5 million, breaking the record set in 2001. Optimists say the economy's strongman can use wealth accumulating in homes to keep the performance going indefinitely. But that sounds suspiciously like the stock market logic that pushed "irrational exuberance" into the lexicon. And as Federal Reserve Chairman Alan Greenspan recently noted, it's difficult to identify a bubble until after it bursts. latimes.com

To: Jim Willie CB who wrote (6343)	9/14/2002 6:26:00 AM
From: stockman_scott	Read Replies (1) \| Respond to of 89467

Greenspan urges discipline By Richard W. Stevenson New York Times Posted Friday September 13, 2002 bayarea.com WASHINGTON - Alan Greenspan, the Federal Reserve chairman, warned Thursday that the economy would suffer if Congress failed to keep the federal budget deficit under control. But he then advised against the Democrats' efforts to replenish the government's coffers by rolling back or delaying the $1.3 trillion tax cut signed into law last year by President Bush. Appearing before the House Budget Committee, Greenspan said little about the economy, disappointing investors on Wall Street who had hoped for signs of optimism. Stocks closed lower, with the Dow Jones industrial average falling more than 201 points to 8,379.41, as the market also was hurt by concern about a possible war with Iraq and new indicators of economic sluggishness. Instead of providing clues to Fed interest rate policy, Greenspan injected himself squarely into the partisan debate over the reasons behind the rapid swing from budget surpluses to deficits. The message of the Fed chairman's testimony was that a breakdown of budget discipline would lead to higher interest rates and slower economic growth in the long run. Yet in the question-and-answer session, Greenspan seemed to align himself philosophically with Republicans and anger Democrats over how to address the nation's fiscal troubles. Greenspan said the specifics of dealing with the situation were up to Congress, and he urged the House and Senate to extend budget rules, adopted a decade ago with bipartisan support, that theoretically bar tax cuts and spending increases that are not offset elsewhere in the budget. But at other points he placed himself in the camp of low-tax conservatives. He suggested that increases in domestic spending should be tightly limited and that it was too late to undo last year's tax cut, even though much of it is not scheduled to take effect for years. Many Democrats felt betrayed by Greenspan when he gave Bush's tax cut a qualified endorsement early last year, undermining their argument that the tax cut was fiscally reckless. With their warnings that the tax cut could lead to renewed budget deficits having come to pass -- in part as well because of the recession and the costs of fighting terrorism -- Democrats have been trying to turn Greenspan's considerable influence on Capitol Hill to their advantage by emphasizing his demands for fiscal discipline. Up to a point, Greenspan gave Democrats what they wanted Thursday. He said he still supported an idea he floated last year, to allow tax cuts and spending increases to take effect only if the budget surplus projections that they were based on proved to be on track. Many Democrats have been making a case that a ``trigger'' of the sort proposed by Greenspan would justify canceling or postponing provisions in Bush's tax cut that have not yet taken effect. But when asked specifically by Rep. Ken Bentsen, D-Texas, whether he would support delaying the scheduled tax cuts, Greenspan said no.