Thursday, October 30, 2008

The Columbian doesn't get it

From the Columbian:

Clark County’s economy and that of the nation will recover from today’s financial meltdown when people give up the herd mentality that has us galloping off a cliff.

You should read the entire article but basically she is saying this whole meltdown is avoidable.
I don’t think Julia Anderson gets it. Consumers spent 105% of their income for the past several years. This was fueled by mortgage equity withdrawals. Our economy expanded based on this temporary wage increase and now we have taken a collective pay cut. Not only is the equity gone but now we need to service the debt which lowers disposable income even further.

We still have a significant consumer contraction ahead of us. No the world isn’t falling apart but this isn’t a small bump in the road either.

This is a permanent, unavoidable contraction due to lower consumer income levels.