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Strategies & Market Trends : The Residential Real Estate Crash Index -- Ignore unavailable to you. Want to Upgrade?

To: Amy J who wrote (24951)	11/1/2004 4:34:49 AM
From: Elroy Jetson	Read Replies (1) \| Respond to of 306849

People saved something like 20% or more of their income during the Second World War, mostly due to a restricted availability of things to buy. The war ended in 1945. By 1947 the availability of most consumer goods were restored and people made purchases they had been forced to postpone for years. It should be no surprise that consumers during this period spent more than they earned. The economy was very buoyant during that period. The recent spending beyond the constraints of income, of the past four years, does not follow a period of consumer good shortages. Rather it coincides with a period a great wealth destruction. Back to the 1950s. Once the pent-up purchases not made during the war were made in the post-war period, spending slowed - so much so that Eisenhower was concerned, shortly after becoming President in 1953, that the economy might fall back into the pre-war depression. Horribly mistaken in my opinion. He called the heads of large consumer good manufacturers to the White House and urged them to extend credit to potential buyers. This was the same period, 1950, which saw the introduction of the first credit card Diner's Club. This cardboard card could be used by businessmen to pay for meals. The list of restaurants which accepted the card was printed on the back. But in 1958 Bank of America issued the first 50,000 Bankamericards, the predecessor or Visa, which for the first time allowed consumers to roll-over their balance due by making a small monthly payment. These and other innovations added convenience and rolled future demand into the present. Businesses ring-up sales from years into the future today. All quite magical. But the inverse side of the magic happens when additional debt cannot be added. Then you experience an economic depression as de-leveraging occurs - or at a minimum the grinding economic stagnation of a Japan where the debt is paid down over a period of decades characterized by subnormal demand. .