Raghu writes: >> Two questions: >> 1) How do you know that "we are poorer" and that there is "no >> hoarding"? What do these terms even mean?
We are poorer in the sense we have in reality less wealth than we thought we did. This seems self-evident to me, so in all honesty, I am not sure how to answer. Two years ago, people would look at their personal balance sheet and think that their net wealth would allow them to satisfy a certain level of desires. Many people acted on those desires, thereby incurring debt, which would be ok, if they actually had the net wealth to satisfy the debt. That turned out not to be true. They did not have the net wealth to to satisfy the debt, so now they have the same assets, but more debt. As a result, they are now going to have to forego consumption and satisfaction of desires until the debt is reduced. In a certain sense, many years of consumption were compressed in a few years, meaning consumption that would have happened in 2009 happened in 2006, so there are retailers hurting bad in 2009. (Like Circuit City -- since everbody refi'd to buy a big screen TV three years ago,! who is going to buy a big screen in 2009?). >> >> 2) How would your prescriptions change if the items being consumed are >> not big screen TVs or SUVs but food, medicine or college tuition? Are >> we too poor to afford those too? It's not a prescription, it is a diagnosis. There are people who now cannot go to the college they want to go to because their parents have less money than they thought they were going to have. When Obama fully nationalizes health care and the rationing board sits around to determine who gets what, the available rations will be less than they would be than if the asset values of 2006 were real. We can't avoid it -- we have less "stuff" to trade for other "stuff" than we thought a couple years ago. Plans made based upon 2006 nominal asset levels are not going to be successful -- they are going to end up in my office. David Shemano _______________________________________________ pen-l mailing list [email protected] https://lists.csuchico.edu/mailman/listinfo/pen-l
