Tue, Oct 03 2006

When rainy day saving becomes rainy day spending

I've been noticing in acquaintances a lot of vacationing and a lot of buying of home accessories and other items in the past few months. I've been wondering why people are spending so freely when the economy seemed bleak not so long ago. One article from Real Estate Journal may explain at least some of the loose change jumping out of pockets.

I hadn't realized that so many people who cashed out equity in their rising home values had used the money to pay past debts. Between hearing about that and hearing that people are still spending freely as home prices pull back and mortgage rates creep upward, I'm a little concerned that many people are continuing to live beyond their means. It's a big gamble, given the wide swings we've seen in employment and other economic data the last decade or two. And these swings seem to be coming closer and closer together, which is giving big spenders less time to pay off all that accumulated debt during economic upturns.

Legislators can focus on banning online gambling and pat themselves on the back for that if they wish. I still think the great majority of real gambling is happening among middle-income taxpayers who are living on credit cards and who are trying to push loan payments and higher mortgage interest off into what they hope is a distant and bountiful future.

posted at: 14:30 | category: /Miscellaneous | link to this entry