Joseph O'Brien 10 p.m., Sept. 20
Consumers Pay Off Debt; Economy Will Be Weak. Wall Street Rejoices
American consumers cut back debt by $21.5 billion in July -- a 10.3% annual rate, according to the Federal Reserve. Outstanding debt is down 4.2% from a year ago. That represents the biggest year-over-year decline since 1944. American consumers are wisely paying down debt. Economists are wringing their hands, wailing that "private virtue [thrift] is public folly." That's because consumption is 70% of the U.S. economy. But the fact that consumers are cutting back spending, paying off debt, and saving, is GOOD NEWS, although it will bring pain in the short run. Meanwhile, stock markets all over the world are feasting on the consumers' pain. We saw it this past weekend. Economists at an international gathering were told that economies remain weak; therefore, interest rates will stay low, and deficit spending will continue. Markets immediately celebrated. All this liquidity is buoying stock markets around the world. Your pain is Wall Street's gain.