The Post Still Hasn't Noticed the Housing Crash

It seems they still haven't gotten the word. The paper had a front page piece on how some consumers are returning to shopping again after staying away for the last six months. While the article includes some comments on consumer psychology, there is no discussion of the fact that consumers have lost close to $6 trillion in housing wealth over the last three years. This would be the primary cause of the falloff in consumption/ rise in saving rates. At one point, the article refers to the rebound of the stock market as one reason that people might be returning to spending. It is unlikely that this would be a major factor for many consumers. According to the Federal Reserve Board, three quarters of families had less than $35k in the stock market (including retirement accounts) in 2007. Given the relatively small amount that most families have in the market it is unlikely that even large fluctuations in prices would have much impact on the consumption of most families.

--Dean Baker