Monday, May 16, 2005

Bubble, bubble, toil and trouble....

Right now I'm rather concerned about the economy because of the asset bubbles that exist, especially in the housing market. The link above is to a site called "The Prudent Bear" that has a good presentation of what's wrong with the economy. Americans think they can spend their way to prosperity. But in the long run savings and investment bring about economic growth. I believe there's a connection between the economy and virtue. An excessive thirst for material goods that are not essential can cause people to go into debt and in the end leave them poorer.
Every month the trade balance gets worse because Americans are buying stuff they don't need with money they don't have. It can't go on forever. But if the bubble in the real estate market bursts, then people will face big problems. Consumer spending has been fueled by high housing prices. Bursting bubbles will bring "toil and trouble."


Joanne said...

A timely meditation for me! I am working at a classy resort today and tomorrow, and I nearly succumbed to an impulse buy of some rather expensive perfume in the spa gift shop. While it would not put me into debt, I talked myself out of this little indulgence as follows:

Do I want it? Yes. Do I need it? No. What is perfume for? To attract someone? My husband appreciates frugality and an eye on the savings balance more than he appreciates french lily of the valley scent.

I know our house value is way overinflated. I doubt we will be able to cash out the equity before the bubble bursts because we don't want to move our kids right now.

But on suburban Long Island we are surrounded by people who are so overleveraged and seem to think it enhances their stature. I earn more and save more than most women I know, yet I think they look down on me because of my simple taste.

RAP said...

I like the way you linked the economy with virtue. I hadn't thought of that before. And yes, there is no way the real estate market can continue. We will definitely being paying the price of our excesses and soon.

Anonymous said...

Good post.... somehow or other we link our self worth with how much stuff we have (didn't saw 'own' because half the time we don't actually own it since it's on credit). And I think joanne is right, some people do look down on you if you live in a smaller house or drive an older car, and really, you might have higher earnings but choose to live fairly simply (which is still not so simple compared to most of the world!).

Some of the most unhappy people are the ones pursuing wealth and 'stuff' - it's never enough and someone else always has more.

Although I tend to be not a big spender except on books, lately I have really had a lesson on what's important. My sister in law, aged 43 is dying of cancer and I am privledged to be with her almost every day... she is very wealthy in material things but they don't mean a danged thing as she will tell you herself. Times like this strip you of 'things' and your real wealth comes from what's inside you.

Sr. Lorraine said...

Colleen, I'll pray for your sister-in-law and your family at this difficult time.
I'm working on a project of writing a book on coping with cancer from a Catholic approach. I'd like to put in some stories of people and how they cope with it from a spiritual perspective, either from the person who has cancer or the caregiver. If you would be interested in submitting a story based on your experience please email me about it. Thanks!