OT: "Crash of '99" Article

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This is an interesting article from Salon magazine. The "concentration of wealth" argument is familiar to most students of economics. The potential "demand collapse" has been discussed on this forum.

Without doubt, debt is an Achilles heel of our current economy. This is one reason I have suggested debt reduction and a defensive investment strategy. Before time and space is wasted on this thread, this does not mean I am a "doomer." I've been invested defensively since earlier this year and have predicted a sharp recession next year. Please note, we can have a recession (or even a depression) without a collapse of society.


-- Ken Decker (kcdecker@worldnet.att.net), October 19, 1999



Hasn't salon already been caught lying in it's coverage. Not getting something wrong, but misqouting people thet they interveiwed to fit their editorial agenda. Why would we beleive a publication that does that?

If you haven't heard of this, give me a few days and I'll dig up the specifics.

And keep your...

-- eyes_open (best@wishes.not), October 19, 1999.

That's pretty funny. I wonder why your doomer buddies continue to post information from World Net Daily?

-- aa (not a) (aa@aa.aa), October 19, 1999.

Depression! You must not get out of your ivy covered tower too much Mr. Decker. You really should, you know. Mingle with the Joe Six Packs down at the local pub, make it a couple of pubs...And you just might come away with a little different perspective about the current state of the social cohension question sir. Depression! Man I would not be in a big city after sun down for any reason, come to think of it, there are sections of any city which I would not care to be afoot in after dark right now. But in a Depression senerio? Lord you jest sir! Or else when you herded cattle the one time you held down a productive manuel job, the horse threw you on your head.. A Drepression would be the worst of all social senerios....


-- Shakey (in_a_bunker@forty.feet), October 19, 1999.


You may be right. Do you have any examples of WND saying something that it knows is not true? (As opposed to just ommiting things that the editor in cheif doesn't agree with like most newspapers?) If so, please point me to it. I would love to delete unreliable news sorces from my reading.

Who always says "The truth is out there."? Their right. But I'll be damned if it's easy to find.

Keep your...

-- eyes_open (best@wishes.not), October 19, 1999.

Just a little snippage from the article, now how many folks do you know that have refinanced their houses to feed the consumers dream? I know a few, my brother for one.


On the household side, consumers have been refinancing their mortgages in record numbers. But not many are doing it to lower their monthly mortgage costs. Instead, they've been using the cash to finance home additions, buy new cars or retire credit card debt -- a one-time fix that can only be repeated if home values continue to rise and interest rates continue to stay low.

On the business side, corporations have been buying back stock by issuing bonds. Why? To keep their stock prices up. This fuels consumption among the stock-owning public through the so-called wealth effect. High- income folks go out and buy Lexuses and take exotic vacations because the stock market is doing their saving for them.

The combined effect has been a domestic debt level that has risen at a better than 9-percent clip over the past 18 months, while the national savings rate has fallen into negative territory. Debt-fueled consumption "represents the Achilles heel of the U.S. economy," says Jane D'Arista, an analyst at the Fed-watching Financial Markets Center. "Servicing debt for households is now 20 percent of disposable income after taxes, up from 17 percent in the early 1990s."

The growing inequality in wealth and income -- a long-term secular trend -- makes it more difficult for debt-laden households in the bottom half of the population to repair their tattered balance sheets. They will escape their personal debt traps only if the economy continues to grow, unemployment stays low, the government passes another increase in the minimum wage and they post real wage gains. In that regard, yesterday's income report showing solid gains for every income group was welcome news.

If, on the other hand, the stock market takes a tumble and upper-end consumption slows, that could trigger layoffs in many of the high- flying service businesses that employ so many people on the bottom half of the income ladder. This would then expose the ugly fact that the final years of our consumption-driven economic expansion have been built on a shaky foundation of debt

-- Brian (imager@home.com), October 19, 1999.

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