Whee! The Dow just closed 936 points up. But that doesn’t guarantee that your depression will lift.
The volatile market could just as well take a plunge or two or 10 in the coming weeks. With that in mind, go back a few days and read Kathleen Madigan‘s October 10 item in the Wall Street Journal‘s Real Time Economics blog, “Loss of Wealth to Weigh on Consumer Spending.”
And wealth is lost, as she points out:
By so many measures — stock portfolios, home equity, and bond holdings — households are far poorer than they were just a year ago. In fact, the numbers might well show that U.S. consumers are less wealthy than they were in 2006. . . .
Even before this summer, wealth had been walloped by the credit crunch and the housing slump. Household net worth in the second quarter of 2008 was down $2 trillion from a year earlier when it peaked at $58 trillion, according to the Fed data. Household equity holdings alone plunged $1.4 trillion.
Strapped as we are, even after today’s stock-market rise, we’re being told by some experts that we all may have to spend our way out of this recession-verging-on-depression.
Get ready for a blizzard of ad campaigns and other propaganda urging you to be a good citizen by going out and spending money.
Save your stores, you’ll be told, because retailers are getting ready to take a major hit — a tsunami. Experts (or people who say they are) predict the biggest drop in consumer spending in three decades.
But maybe we should take an On the Beach approach to this and go shopping now because we may have no money with which to shop when we reach retirement. Madigan points out:
What heightens the jitters about this loss of wealth is that consumers are grasping the fact that the losses affect more than their ability to spend now. Their futures are being threatened as Wall Street’s implosion has taken with it trillions of dollars in retirement funds.
The Congressional Budget Office reported Tuesday that pension funds, retirement plans and 401ks have lost $2 trillion over the past 15 months. Individuals’ 401ks alone have lost $500 billion.
This article from the Village Voice Archive was posted on October 13, 2008