From: sehari@iastate.edu (Babak Sehari)
Subject: Re: The end of media generated recession is close.
Originator: sehari@vincent1.iastate.edu
Organization: Iowa State University of Science and Technology, Ames, Iowa.
Date: Mon, 5 Oct 1992 16:45:05 GMT

In <1992Oct5.153159.28076@engage.pko.dec.com> pub@riscee.pko.dec.com (Publius) writes:

>In article <23339@optima.cs.arizona.edu> bakken@cs.arizona.edu (Dave Bakken) writes:
>>
>>Sheesh!  Consumer confidence indices are very low when you compare
>>to them other periods of the same amount of unemployment, etc., and
>>this is because the media has been crying that the sky is falling
>>for about a year now.

>Consumers lost their confidence not just because they saw friends
>losing their jobs, but also because they saw how little their neighbors
>could sell their houses for.  As they saw their houses losing value
>each day, they got scared and changed their spending habit.  They
>can no longer count on home equity to bail them out!  Many of them
>probabily have negative net worth.  I would argue that it is the
>lousy balance sheet picture of the average consumers that is the
>cause of the low consumer confidence.

>In the long run, this might not be bad.  We as a nation will produce
>more, save more, export more, and spend less, after we get through
>this process.  But in the mean time, there will be a few more 
>painful years as our economy is retooling itself from the spend-led,
>consumer-led economy to the saving-led, investment-led economy.

>The excess piled up in the 80's will have to be repaid with hardwork,
>sufferings, and economic dislocations.  There is no other way out.

>> ...  Many people out there actually think that
>>unemployment is 15%, and things are as bad or worse than they 
>>were under Carter.

>But the home prices were rising up fast during the Carter era.
>That is why people did not feel as bad then as they do today.

>> ... The problem is, after a while this can be
>>a self-fulfilling prophecy as people become more cautious in
>>their spending.

>What's wrong with people being cautious about their spending?
>We have the lowest saving rate among the industrialized nations.
>Don't you think it's time for a change?  Do you really believe 
>we can spend our way into prosperity?  Many consumers have already
>spent to their credit limit.  Do you really expect them to pull us
>out of this recession?  It is true that every post-WW II recovery
>was led by the consumer spending.  But each time as the consumers
>pulled the economy out of the pit, their balance sheet got a little
>worse.  This time around, don't expect them to be there to do their
>part, for they simply can't afford it.  It will take many cold winters
>for them to for them to hide in their caves and rebuild their balance
>sheets.

>Don't ever think that we as an economy can cheat the market.  There
>is no easy way out.  The hand of Adam Smith is fair, and the economic
>sins can only be repaid with sufferings.


>Regards,
>-- 
>-- Publius
>Disclaimer: These opinions are mine, all mine, mine alone.

I do not see it that way! Here in Iowa, we have a boom! Average price of
houses gone up %40 since 4 years ago, when I came in here. The unemployment
rate is %3.0.  Maybe some regions, specially those places with large 
military industry are in adjustment phase, after the end of the cold war?
Or may be I bring the good luck to a region?! -:)

                     With highest regards,
                          Babak   Sehari.

-- 
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