Ok, I’m not an economist. As I understand it, though, one of the factors in markets rising is increased consumption. In theory. That’s why President Bush wants to give everybody $800 to spend.
And I’ve also been reading for months (example) that apparently people have been spending more and more on credit in the last few years. Also, people have been borrowing against their houses even more with HELOCs and the like. Heck, you can even get debit cards from your 401(k). There is literally nothing that people can’t borrow against nowadays…and they’re borrowing.
If people have been getting a huge percentage of their spending power from debt, was any economic rise essentially an illusion to begin with? Are we just seeing the natural results of what happens when the amount of debt available declines?
HELOCs only go so far. The 401(k) debit card can’t (I think) go past zero. We’re all spent out.
This is really just my musings on the situation—as I said above I’m not an economist and such.
What do you think? Do you know more about economics and think I’m completely wrong? Or does this sound kind of logical?