The willingness of consumers to keep spending and piling on debt in the midst of a slowing real-estate market is hailed on Wall Street as an act of patriotism, which Schiff considers perverse. Imagine, he suggests, that you ran into a good friend and asked him how he was doing. His reply: “I took out a third mortgage, maxed out my credit cards, and emptied out my kids’ college savings account so I could buy a bigger TV and a new car, and we’re going to Greece on vacation over the holidays. Things are great!” Schiff lets the idea sink in and then finishes the thought: “And we’re celebrating the fact that we’re doing this as a nation?”
We are celebrating it, or we were until the isssues of higher interest rate leading to APR resests leading to foreclosures leading to CDO issues started to appear on the radar.
The article lists five steps that could lead to hard times:
1. The Bottom Continues to Fall Out of the Housing Market
2. The Derivatives-Related Meltdown, Part II
3. Consumers Run Out of Steam (and Take the Economy Down With Them)
4. That the Rest of the World Decides They Don’t Need Us and the Dollar Tumbles Hard
5. That We Don’t See It Happening Because It’s a Slow-Motion Train Wreck
Sounds fairly plausible to me. Number 4 is the one that makes the most nervous. I see no happy there.
Now spice this doomsday stew up with the fact that we are tossing over a trillion large into Iraq and you've got yourselves a FUBAR event that will go down in the history books. A trillion that could have been invested in America's desperate infrastructure needs. But hey, we have HD televisions, right Mr. Kudlow? I hope all those consumer good we purchased by borrowing against our homes tasted good on the way down.
I guess we could always cut taxes, right?....Right??