wJeremiads
"Facts do not cease to exist because they are ignored." -Aldous Huxley

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wMonday, November 14, 2005


MEANS TO END?: OK, I am not an alarmist on matters economic, but this piece by Washington Post columnist Robert Sameulson has me worried. Samuelson begins by noting,

Ours is a wealth-driven era, when huge increases in home values and (before that) stock prices make people feel richer and cause them to buy more. They spend more of their regular incomes, borrow more or sell something, most likely stocks. You can imagine this "wealth effect" as a powerful afterburner that's boosted the economy for roughly 20 years.

Then he worries that

While everyone is now worrying about the economic impact of Katrina and Rita -- on consumer confidence, energy prices, inflation and the federal budget -- the real story may be whether the afterburner is flaming out.

Again, I'm not a down-on-capitalism type or a peak oil obsessive, but Samuelson makes a good point. Everybody's been lamenting Americans' lack of savings but we have largely ignored the criticism and continued to prosper. We've generated and extracted massive sums from the stock market and then we mortgaged our houses to take advantage of the rapidly rising values.

But what happens if housing prices stagnate or decline? Where is the next big pot of cash that Americans can tap into? Maybe there is one but I sure don't see it. Samuelson cautions that "this needs not be a disaster" but that's a phrase just calculated to bring out the inner paranoiac, isn't it?

posted by Jeremy at 10:36 AM