There's plenty of talk - even here, on a nominally econ-centric dsicussion list! - about various discrete bubbles and overextensions: "innovative" financial products helping form a real estate bubble, runaway consumer/credit card debt, stratospheric energy costs. But how independent of one another are they? A recent Goldman Sachs research brief cited the 'over-leveraged consumer,' a character I find appearing with greater regularity - though almost always in passing note, as if his/her existence was widely understood and acknowledged. Shouldn't there have been a national dialog on this figure's emergence?
My problem is how does someone so jammed up unwind? I was reading somewhere the other day that used SUV prices are down an average of 10% over last year. As a result, owners pinched by (hopefully temporary) higher gas costs, reluctant or financially unable to suffer such a haircut, are trading into more fuel-efficient models - bringing negative equity with them. This is ust one example. I've worried here before over what would happen if the short end of the curve caught up with those living under ARMs. Or if illness or arrest affected them similarly. Is attentive tightrope walking all there is to life?
Most troubling in all this is the reaction to treat the over-leveraged consumer (i.e., the person who along with all our foreign creditors is fueling what little economic growth we've managed despite the Bushites) as an irresponsible moral degenerate when there are real structural reasons why people are spending what (and how) they are.
Rant directed at no one in particular. Please excuse it.
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