Credit and debt: it’s all about tomorrow, isn’t it?

Posted on | August 30, 2007 | Comments Off

And in further economic news …

The Associated Press reported on Monday that a new survey by the National Association of Business Economics found bad credit has supplanted terrorism and national security as the biggest immediate threat to the U.S. economy.

Borrowers’ withering ability to pay their bills and the subsequent fallout in the credit markets this summer topped the list of short-term risks on peoples’ minds, according to a survey of 258 members conducted by the National Association of Business Economics.

[snip]

Only 20 percent of members cited defense and terrorism as their biggest immediate worry, down from 35 percent when the survey was last conducted in March. Credit risk also topped gas prices, inflation and government spending.

“Financial market turmoil has shifted the focus away from terrorism and toward subprime and other credit problems as the most important near-term threats to the U.S. economy,” said Carl Tannenbaum, president of NABE and the chief economist at LaSalle Bank/ABN Amro.

Since that report, The Conference Board has reported that consumer confidence took a nose dive in July — the largest one-month decline since Hurricane Katrina hit — and another report in today’s Washington Post contributes this interesting insight from an investor:

The national numbers show that the housing market was on the ropes even before the worst of the credit crunch hit in August and walloped global financial markets, said Brian Bethune, a U.S. economist at Global Insight. “The situation indicates that there were already fracture lines, and now those fracture lines have become more like fissures,” he said.

So, I’ll ask what I’ve been asking yet again: why didn’t people see this coming?

There were warnings from some folks, notably (but not with much urgency) from Alan Greenspan, that the exotic mortgage lending products that were getting people into houses they couldn’t afford was a threat. And the Bush Administration, with their characteristic What? Me worry? attitude about things economic, was so busy bragging about how homeownership was climbing that the concept of caution was entirely unwelcome.

You know, as much as you might want to encourage and support asset-building among lower income folks as a poverty alleviation strategy, there is a reason why people who can’t afford mortgages tend not to have them.

And get-rich-quick schemes evidently have a very limited shelf life, even on Wall Street.

Back in the days when he was being a legend instead of a political hack, Alan Greenspan was a legend precisely because — unlike the relevant parties today — he could see what was coming and respond to the writing on the wall. He didn’t wait for things to get to crisis mode before trying to address foreseeable problems.

There are two ways to think about the future.

The future can be a place to push your problems out to, when you prefer not to solve them today. Of course, that usually makes the problem worse and it makes dealing with it much more difficult.

The future can also be a place to look toward as it slowly comes over the horizon. That way you can see both challenges and opportunities as they come your way and you can even get ready for them.

Which one of those perspectives you use to run your business can sometimes be a matter of personality or personal ethics. (Do no harm sort of leaps to mind in the current brouhaha.)

Or it can be a matter of the degree to which you will personally have to pay the consequences of taking one route or the other.

[tags]economy, credit markets, Wall Street, consumer confidence[/tags]


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