WSJ on wealth

Seth Ackerman SAckerman at FAIR.org
Wed Jan 19 15:05:32 PST 2000


Doug Henwood wrote:


> Carl Remick wrote:
>
> >Let's not forget the recent words of The Man Himself, as cited on
> >the World Socialist Web Site: "In the course of a speech to the
> >Economic Club in New York City January 13, warning about the
> >possible consequences of a soaring stock market, Greenspan noted
> >that fully one-fourth of annual economic growth in the US since 1996
> >- about one percentage point of the 4 percent growth rate - has come
> >from the 'wealth effect' of well-heeled consumers spending more
> >because of their rising investment portfolios."
>
> I think AG is greatly overstating things. There's no proof that the
> stock market effect on consumption is anything like that strong.
>

But you were just saying that debt has risen because people are borrowing against the value of their stock. That debt represents consumption, doesn't it? So how can there not be a "wealth effect" that shows up as higher consumption?

Seth



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