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Author: mlw68958 One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 54107  
Subject: Re: The war of the Economic views Date: 10/12/1999 8:39 PM
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"Today however, with nearly "full" employment, the primary driver in our economy is consumer spending, not capital spending, and in turn that consumer spending is increasingly influenced by the existence of "soft" credit sources. Soft credit being money market funds, home equity loans, 401K reserves, stock options, and credit cards. The extent to which these assets are turned into cash and spent depends a lot on consumer confidence in the economy and in the stock market."

With all due respect, since when are home equity loans and credit cards assets that can be converted to cash? You can borrow under them, but that borrowing has to be repaid. Doesn't that make them liabilities? 401K "reserves" are assets but, for most of us, turning them into cash requires a loan or substantial withdrawal penalty. That also makes it unlikely that the funds will be converted into cash for anything but emergency needs or major purchases such as a home. And, a loan against a 401K account has to be repaid and is, as such, a liability.

I am not agreeing or disagreeing with your overall argument, just the above portion which appears to be flawed (especially the last sentence). Maybe a stronger argument here would be something about the "wealth effect" (bolstered by strong economy, high consumer confidence, rising property values, large papar gains due to long bull run, etc.)driving increased consumer spending and willingness to incur debt? Just a thought and my HO....
mlw
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