At the end of last month I proffered three potential explanations for the continued fall in the US savings rate. The first explanation was that the economy was in a cyclical recovery predicated on asset price inflation and this gave enough troubled debtors breathing space to spend more freely. The second explanation was the opposite, that distress amongst those troubled debtors was leading them to spend a larger percentage of income. The third explanation was that strategic defaults were giving a lot of people money in their pockets that would have otherwise gone to servicing debt and this had increased consumption.
The people out there who read it, and who actually pay their mortgage every month, get mad. Then they start wondering why one political party messed around with a health care bill that the public didn’t want while the financial situation got worse – and why politicians are bailing out cynical consumers who decide to play the ‘strategic default’ game. And then they get madder when other (typically urban-elitist) cynics tell them to suck it up, because it’s completely unreasonable to expect people to honor an inconvenient contract. Only unsophisticated rubes actually care about something as un-hip as respect for contractual obligations.
It’s that last attitude that really motivates people to go out and vote, by the way.
PS: No, it’s not a bipartisan mess. All pretenses of it being one stopped once the Democrats decided that they’d rather pass an unworkable health care debacle than do work on jobs or the economy. Despite the GOP’s long, strenuous, and continuous objections, might I add. In other words, I believe the phrase is “You break it, you buy it?” – Well, the Democrats broke it.