An article which appears in the February, 2007 issue of Fidelity Investments "Fidelity" magazine points out how the doomsday scenario, as related to the consumer debt level, is likely significantly overstated. In fact, rising consumer debt is associated with very positive economic signs. As Fidelity points out, "The low interest rates of the past few years have also heightened Americans' eagerness to borrow." It is cheap and affordable to borrow money, and funds are readily available, so consumers have responded accordingly.

It is further pointed out within Fidelity's article that a significant component of consumer debt is mortgage-related debt and that the rise in this form of debt is an indicator of the overall rise in home ownership levels, and housing plays a large role in boosting consumers' wealth. "A record 76 percent of household borrowing is mortgage debt, and the rise in that category reflects, in large part, the rise in the home ownership rate to nearly 70 percent at the end of 2005...This debt is good." The article goes on to point out that the value of consumers' homes, "...combined with financial assets, pushed the net worth of the average American household to 5.6 times annual income in the second quarter of 2006, well above the historical average of 4.8." It is interesting how the is the exact opposite of the message we receive from about 99% of the mainstream media, which seems endlessly intent on foisting a negative drumbeat upon us all. The fact remains that home ownership rates are at an all time high, and this is a sign of economic progress and hardly a harbinger of disaster to come.

To be fair, the Fidelity writing does express some concerns as related to overall property values. Consumer spending drives about 70% of the economy (as measured by gross domestic product) and consumers spend more when they have confidence that their homes will continue to appreciate. Further, a spike in interest rates could put a damper on consumer spending to a degree, although Fidelity points out that only 12% of new mortgages have adjustable rates. Most are fixed rate loans which would be unaffected by short term interest rate spikes. There are, however, always concerns in any economic cycle and it is unfair to judge the current economy based solely upon what could go wrong in the future. Our economic model does not allow for an endless state of nirvana, where there are no concerns or goblins waiting around the next corner. We continue to hear many people hearken for the "good old days" of the late 1990's. Yet, history has shown that that period of time was marked with all sorts of warning signs of a coming meltdown, even the Federal Reserve Chairman warned of it at the time. Still, that time period, even in retrospect, is not judged as harshly as our economy of the last few years, which has not yet experienced any such collapse.

It is, of course, an economic truth that periods of economic growth will be followed by a period of recession at some point. The economy cannot and will not expand indefinitely without some "correction;" no president is going to change this, despite the Clinton Administration's claim that it did just that. (It is more accurate to state that presidents have a much more limited control of the economy than what is generally accepted; however, the president is the top dog, and that is where most blame or credit will go if the economy tilts one way or another.) It is also a general truth that economic expansions do not necessarily treat everyone in all parts of the country in all industries and in all jobs exactly equal. Just as there are cycles in the overall economy itself, there are sub-cycles within that economy. There are also longer term trends at work within the economic framework, trends which are not cyclical but evidence of fundamental changes taking place. Manufacturing, for instance, has been on the decline for some period of time, and there is activity within the technological realm which did not even exist a decade or two ago. Wise people survey the economic landscape and make constant determination whether or not they are personally on the right track, not just financially, but from a career standpoint as well. For instance, an individual who makes his living renting DVD's in a brick and mortar retail outlet should be very concerned as an increasing percentage of the public downloads their movies from a website.

The bottom line in all of this is that the economy, as it has been for years, continues to be very strong and resilient. It has withstood war, mammoth hurricane, unprecedented terrorist attack, even runaway gasoline prices, and remains fairly steady. Things are not perfect, and they never will be, not under this or any other president. Individual cases of hardship will always be present in our society; this is not the fault of Washington, D.C. or our economic system. United States citizens continue to have as much or more opportunity for financial success as those who live in any nation on earth; do not let a bunch of spoiled malcontents try to convince you otherwise.

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About the author: Ed Abraham is a concerned citizen living in flyover country, U.S.A., who happens to be truly disgusted by the loss of common sense in our society and is doing all he can to try to reinstall it.

Email: eabra@myway.com

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