Wednesday, May 21, 2008
Yesterday's New York Times story about repossessing pleasure craft is well worth reading to learn about what happens when boat owners default on their loans, but it also contained a few gloomy assessments of the current state of the U.S. economy.
The Times seems to be in competition with the Wall Street Journal for the "gloomiest" newspaper of them all (see Monday's post The gloomiest newspaper).
To wit, note the opening paragraph:
So many people have so many things they can no longer afford. This is an excellent time to be a repo man.Yes, the end of the debt-fueled consumption binge is becoming conventional wisdom, but you don't often see it presented in such a glib manner in a major newspaper.
And speaking of things people can no longer afford, we visited a nearby open house over the weekend and the owner was there to greet the few potential buyers that trickled in. This was a custom (and
somewhat very odd) design that probably held very little appeal for most buyers.
The owner noted that they designed and built it as their "dream home" but they can no longer afford it - any reasonable offer was being entertained (i.e., they are desperate to get out from under it).
As in the New York Times piece, it was an interesting choice of words - that many people "can no longer afford" these things. As if they could afford them at one time? When home prices moved in only one direction?
Anyway, back to the competition:
Some people lose their house or their boat to abrupt setbacks: illness, job loss, divorce. Mr. Dahmen, who works as a technology manager for a car manufacturer, belongs to a second, probably larger group: he simply spent beyond his means. He is one of the millions of reasons the consumer-powered American economy did so well for most of this decade, and one of the reasons its prospects look so bleak now.The mainstream media is certainly catching on but they are obviously still struggling with the whole notion that a debt-based, consumer-driven economy is fundamentally flawed.
By some metrics, the U.S. economy has done well over the last ten years, but when factoring in the asset value/debt level tango that is once again turning into a very wicked dance, maybe it wasn't such a great idea to stake the entire future of the country on perpetually rising asset prices that would forever outpace the expansion of credit and debt.
How can an over-indebted, over-consuming individual be one of the key factors in an economy that "did so well" earlier in the decade AND a reason for things to "look so bleak" now?