Post by unlawflcombatnt on Sept 10, 2007 13:52:36 GMT -6
from Market Watch:
www.marketwatch.com/news/story/proof-americans-living-beyond-means/story.aspx?guid=%7B66122EA4%2DB773%2D46D0%2D9BFC%2DCC94968EEE77%7D
Americans living beyond their means
Economist Paul Kasriel sees party ending, hangover beginning
By Herb Greenberg, MarketWatch
9/9/07
"You will have to pardon Paul Kasriel, chief of economic research at Northern Trust in Chicago, if he hasn't been the life of the party over the past seven or eight years.
The 60-year-old economist, tapped in 2006 as the top economic forecaster by Arizona State University's W.P. Carey School of Business, has spent a good deal of that time trying to warn anybody who would listen about such things as excessive household debt while taking a jab or two (or three) at then-Federal Reserve Chairman Alan Greenspan. "Illusory" is how, in October 2004, Kasriel described the wealth created by Greenspan's interest-rate cuts...in one of his...reports dubbed, "The Econtrarian," which are available on Northern Trust's Web site....
(Kasriel) wrote, "Today's 'partying' in terms of a disproportionate share of national output being 'consumed' by the household sector is a recipe for a 'hangover' tomorrow."...
"I look at the numbers and I have a sense of history," he says....he is concerned more than ever about the economy, which he believes could be headed toward a "painful" recession. His analysis...suggested Americans are living well beyond their means. "I don't make up the numbers," Kasriel says. "And since the late 1990s, I've been seeing trends that are very disturbing."
He is particularly alarmed at the relationship between personal disposable income and personal consumption expenditures and residential investment expenditures. That is eco-babble for the amount of money people take home after taxes minus the amount they are spending on everyday goods and services and what they spend on buying and fixing up their homes.
(or Disposable Personal Income - Consumer Spending - Mortgage Payments - Home Maintenance/Remodeling)
According to that calculation, Americans have been running deficits in six of the past seven years.
Prior to the recent, unprecedented string of deficits, Kasriel says there have been only 7 other years American households have been so upside-down in their finances since 1929.... 2 of those were during the Great Depression. 3 more were just after the end of World War II. Another was in 1955, then again in 1999. That leads to an obvious question: If they can't afford it, how are people continuing to spend as Thursday's (9/6/07) report of retail sales suggested they are continuing to do as if all is well...
The answer,... Kasriel says: They appear, in large part, to be borrowing against their homes, which will become less available as a piggy bank going forward. "Households are going into debt like never before," he says. They also have been net sellers of stocks. All of this means, Kasriel says, that there will be less cash for things we like to buy.
"...the data are overwhelming that households are spending more than their income."..."
www.marketwatch.com/news/story/proof-americans-living-beyond-means/story.aspx?guid=%7B66122EA4%2DB773%2D46D0%2D9BFC%2DCC94968EEE77%7D
Americans living beyond their means
Economist Paul Kasriel sees party ending, hangover beginning
By Herb Greenberg, MarketWatch
9/9/07
"You will have to pardon Paul Kasriel, chief of economic research at Northern Trust in Chicago, if he hasn't been the life of the party over the past seven or eight years.
The 60-year-old economist, tapped in 2006 as the top economic forecaster by Arizona State University's W.P. Carey School of Business, has spent a good deal of that time trying to warn anybody who would listen about such things as excessive household debt while taking a jab or two (or three) at then-Federal Reserve Chairman Alan Greenspan. "Illusory" is how, in October 2004, Kasriel described the wealth created by Greenspan's interest-rate cuts...in one of his...reports dubbed, "The Econtrarian," which are available on Northern Trust's Web site....
(Kasriel) wrote, "Today's 'partying' in terms of a disproportionate share of national output being 'consumed' by the household sector is a recipe for a 'hangover' tomorrow."...
"I look at the numbers and I have a sense of history," he says....he is concerned more than ever about the economy, which he believes could be headed toward a "painful" recession. His analysis...suggested Americans are living well beyond their means. "I don't make up the numbers," Kasriel says. "And since the late 1990s, I've been seeing trends that are very disturbing."
He is particularly alarmed at the relationship between personal disposable income and personal consumption expenditures and residential investment expenditures. That is eco-babble for the amount of money people take home after taxes minus the amount they are spending on everyday goods and services and what they spend on buying and fixing up their homes.
(or Disposable Personal Income - Consumer Spending - Mortgage Payments - Home Maintenance/Remodeling)
According to that calculation, Americans have been running deficits in six of the past seven years.
Prior to the recent, unprecedented string of deficits, Kasriel says there have been only 7 other years American households have been so upside-down in their finances since 1929.... 2 of those were during the Great Depression. 3 more were just after the end of World War II. Another was in 1955, then again in 1999. That leads to an obvious question: If they can't afford it, how are people continuing to spend as Thursday's (9/6/07) report of retail sales suggested they are continuing to do as if all is well...
The answer,... Kasriel says: They appear, in large part, to be borrowing against their homes, which will become less available as a piggy bank going forward. "Households are going into debt like never before," he says. They also have been net sellers of stocks. All of this means, Kasriel says, that there will be less cash for things we like to buy.
"...the data are overwhelming that households are spending more than their income."..."