Why I think we are about to have another 1987
On the consumer side, I see a lot of similarities between our economy now and our economy exactly 20 years ago. Those who were around from 1987-1992 know the implications of this are not good.
Like most things at such a macro level, there is not a single metric or reason behind this... there are just a series of items that seem to point in that direction. The 2 main points, at least amongst easily quantifiable points are:
1. Consumer spending and disposable income following the 2001 recession stayed higher then historic norms. This was also true after the 1981/82 recession.
2. National Debt has been growing for too many years following the 2001 recession. This has been driven in part by the Iraq war, but by my estimates about 25% of the national debt increase has been driven by consumers spending more then they did historically in similar situations. The same thing happened in the years following the 1982 recession.
The famous "national debt as a percent of GDP" metric does not look troublesome in recent years... but strip from GDP the questionably sustainable increases in housing prices, and the large increase in higher gas price imports and the metric starts looking more dismal. Because of this, I think the fed has no choice but to raise interest rates, and I think the consumer has no choice but to suffer through it.
Like most things at such a macro level, there is not a single metric or reason behind this... there are just a series of items that seem to point in that direction. The 2 main points, at least amongst easily quantifiable points are:
1. Consumer spending and disposable income following the 2001 recession stayed higher then historic norms. This was also true after the 1981/82 recession.
2. National Debt has been growing for too many years following the 2001 recession. This has been driven in part by the Iraq war, but by my estimates about 25% of the national debt increase has been driven by consumers spending more then they did historically in similar situations. The same thing happened in the years following the 1982 recession.
The famous "national debt as a percent of GDP" metric does not look troublesome in recent years... but strip from GDP the questionably sustainable increases in housing prices, and the large increase in higher gas price imports and the metric starts looking more dismal. Because of this, I think the fed has no choice but to raise interest rates, and I think the consumer has no choice but to suffer through it.
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