Deficits, Debt, the Dollar, and Disaster? Who Cares!

Wednesday, December 31, 2003
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Tidbits from the Daily Reckoning:

It has been a great year for stocks – if you ignore the currency in which they are calibrated.

It has been a great year for real estate, too…subject to the same objection. In fact, it has been the best year ever for real estate – ever in history.

* A record 6.1 million homes were sold…up from 5.56 million in 2002. * A record 1.1 million new houses were sold. * A record $3.4 trillion in new mortgages were taken out – equal to a third of the entire U.S. GDP. * And the median house sold rose 9.1% in price during the last 12 months.

Of course, adjusted for the drop in the dollar, the median house is actually worth less now than it was at the beginning of the year.

Yesterday, we also saw a headline that we thought we might need to get used to. “Grocery workers agree to slash pay,” reported the Detroit paper. Elsewhere, the news came out that few people got large holiday bonuses this year.

Americans are going to have to adjust to a smaller share of the world’s pie. They gobble up 86% of the entire world’s savings, but only create a third of its output. Year after year, they consume more than they produce, spend more than they can afford, and borrow more than they should.

Sorry to be so depressing on the eve of a New Year, but reality can never be hidden for too long.

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