Custom Search

11 December 2008

Debt Drops for 1st Time Ever

The consumer debt that Americans hold dropped by 0.8% in the third quarter by an annualized $30 billion. Net worth also dropped as house prices and stock prices dropped.

On the surface that seems like a good thing. But since America's economy basically runs on debt, it's not good for the recovery. People are spending less and loans are harder to come by, so purchases of homes, cars, boats and other big-ticket items has fallen.

Americans are experiencing a major shift in their spending/saving philosophy. Instead of spending their entire paycheck as it comes in, they are saving for the future. Saving used to be the job of their house, as housing prices were rising. Now you can't depend on that.

With 70% of the GDP coming from consumer spending, this trend is a cause for concern.

Net worth of Americans dropped by 4.7% in the third quarter or by $2.8 trillion.

No comments:

Post a Comment