Craaaaaack!
I keep visualizing what the current economic news "looks" like - I think the visual that most often pops in my head is the breaking away of a huge iceberg off the polar ice shelf. It has been cracking for some time now and it is now giving way. God help us all. The other visual is a roller coaster at the peak and now begins the downward plunge.
Why all the doom and gloom on my part? The recent news is scary. Consumer confidence has the biggest drop since 1990, credit card delinquencies spike to their highest levels since 1974, gas prices still high, home sales drop and inventories rise...... Where is the good news?
Of course, the writing has been on the wall for quite some time. The recession post the bursting of the internet bubble was just not that bad. I think the Fed overreacted when they lowered rates so significantly (as a result of the bursting internet bubble and then the horrific events of 9/11). Perhaps we should have taken a little more of the harsh economic medicine back then. Instead, the American consumer became the work horse of the US economy. My economics professor at UCLA, Ed Leamer, kept noting two years ago (when I was taking his course) that the recovery from the 2001 recession was like no other recovery in US history. Instead of business spending pulling us out of recession, it was the American consumer who did the heavy lifting. Of course, this was enabled by the low interest rate environment.
The live for today and spend it if you have it (or even if you do not have it in many cases) is not sustainable over the long term and it is beginning to show.
Why all the doom and gloom on my part? The recent news is scary. Consumer confidence has the biggest drop since 1990, credit card delinquencies spike to their highest levels since 1974, gas prices still high, home sales drop and inventories rise...... Where is the good news?
Of course, the writing has been on the wall for quite some time. The recession post the bursting of the internet bubble was just not that bad. I think the Fed overreacted when they lowered rates so significantly (as a result of the bursting internet bubble and then the horrific events of 9/11). Perhaps we should have taken a little more of the harsh economic medicine back then. Instead, the American consumer became the work horse of the US economy. My economics professor at UCLA, Ed Leamer, kept noting two years ago (when I was taking his course) that the recovery from the 2001 recession was like no other recovery in US history. Instead of business spending pulling us out of recession, it was the American consumer who did the heavy lifting. Of course, this was enabled by the low interest rate environment.
The live for today and spend it if you have it (or even if you do not have it in many cases) is not sustainable over the long term and it is beginning to show.
posted by The Random Gay Guy at 10:33 AM
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