middle class troubles .... and .... we need another Reagan

Following yesterday's discussion of why we're in for a long struggle to get back to what used to be normal, I came across How the bubble destroyed the middle class. The argument simply is that we have sluggish growth now, because nobody has any money. While some of his cheap shots at class warfare are bothersome, there are nevertheless plenty of relevant facts contained in the article to make it worthwhile reading.

As an example, while home prices are off ~30% from their peak, the average home owner has lost 55% of his wealth due to the effects of leverage. With respect to people earning between $39,000 to $62,000, it is estimated that 90% of their assets were "invested" in their homes. Not a good situation, either for now or for the foreseeable future.


For far too long, despite historical evidence to the contrary, housing was viewed by the public as a one way bet. The real estate industry did a masterful selling job. Buying assets using lots of borrowed money is speculative, pure and simple. Accordingly, leveraging works as a "great investment" only so long as prices are going up. That's also true for all other assets. When prices go down, as they inevitably do, the opposite is also true. To repeat Warren Buffett's sage advice, we should aspire to buy the house we can afford and not the house of our dreams. And we should never view our home as an investment. It's a place to live.

Speculation is dangerous. Every time.

A more uplifting article is 'We Need a Ronald Reagan'. What the Big Three of Ronald Reagan, Margaret Thatcher and Pope John Paul accomplished during the Cold War must never be forgotten.


In these difficult times of today, we especially need to remember who we are as Americans, why history can be made better and to always be loyal to the truth. Compared to those who came before us, we have no difficult problems. Let's always try to remember what they overcame to give us our precious freedoms of today.


We'll be fine as long as we stand for freedom and capitalism. They go together.


Thanks. Bob.