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Friday, December 02, 2005

The Grinch is coming

Robert Reich explains that while consumer spending is now a record-high percentage of our economy (over 75%), pretty much all of the ways that consumers have of continuing to spend are completely maxed out. Layoffs are big and wages are small. Spouses are already working, hours are already long, home equity is plateauing and interest rates are rising, and credit cards are already topped out at high rates. Reich concludes:
Put it all together and you see why we’re running on empty. We’re busted. We’ve exhausted all the coping mechanisms for spending more. Our buying binge has to come to an end.

The only question is whether the binge stops before Christmas shopping season, or whether American consumers make one big, final, irresponsible splurge over the next three weeks, and then call it quits.
They're Americans--what do you think they'll do? As Betty and Wilma used to say on the Flintstones: "Doo-do-do-doo-do-doooo, CHARGE....IT!"

And what's the deal with the stock market lately? A sizeable portion of the nation's economy was washed away by hurricanes, huge corporations are declaring bankruptcy, and workers are being laid off by the tens of thousands--yet the Dow is approaching a five-year high. I guess the idea that what is good for Wall Street is good for Main Street can be completely laid to rest at this point.