Re: The over-leveraged consumer
Willy Greenfields wrote:
There’s plenty of talk - even here, on a nominally econ-centric dsicussion list! - about various discrete bubbles and overextensions: “innovative” financial products helping form a real estate bubble, runaway consumer/credit card debt, stratospheric energy costs. But how independent of one another are they? A recent Goldman Sachs research brief cited the ‘over-leveraged consumer,’ a character I find appearing with greater regularity - though almost always in passing note, as if his/her existence was widely understood and acknowledged. Shouldn’t there have been a national dialog on this figure’s emergence?
Well, it’s pretty familiar to what a Merrill Lynch note the other day called “the economics community.” But they’re not independent. US foreign borrowing has gone mainly through the mortgage market and into the housing bubble (and home equity lines of credit). Americans are borrowing from the Peoples Bank of China to buy $500,000 bungalows and $3,000 TVs. Jim Paulsen thinks that’s a great deal.
Doug