Bubble Effects

Photo Credit: Flickr, zzub nik

Why does it seem the economy continues to putter along? Good economic news continues to get kicked in the shins the next day by bad economic news and the cycle continues day after day, week after week and month after month.
 
Every expert has a theory on why the recovery is proceeding at a slower pace than the effects of arthritis in both knees. Here’s one simple theory: No one has any money. At least no one in the middle class has money.
 
Marketwatch’s Rex Nutting wrote recently that it’s no great mystery. The housing bubble crushed the middle class. The cost of plummeting housing prices has been calculated at a staggering $7.38 trillion of lost wealth, sucking American homeowners’ equity into a financial black hole and reversing the trend of economic progress for the middle class.
 
Nutting’s theory is that when the bubble burst, the middle class could no longer take money from their homes to buy cars, boats, TVs and other gizmos. Now they are putting their money “into their homes, not taking it out,” and it will take a long time for the middle class to get back on track and in a financial comfort zone.

— Ron Neal, rneal@pondel.com