Saturday, June 07, 2003

On Thursday the General posed this formula:
Stagnant real wages + falling hours worked + rising output. How long can debt keep this formula afloat?
The answer seems to be, "at least a little while longer."

In April outstanding consumer credit grew 7.3% annualized to $1.756 billion -- and per Dow Jones Business News, " The rise was much bigger than Wall Street expected." This may not have been worrisome in the roaring 90s when real wages were actually rising (consistently for the first time since the late 1960s!), but after 2003:I when real wages fell 0.4%, 2002 when real wages rose a mere 0.8%, and 2001 when real wages fell 0.1%, pumping up those housing loans, car loans and credit card bills looks just plain reckless.

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