In late 2006, I was reading an article in The Wall Street Journal on how home equity percentages had fallen from the 60th percentile to the low 30′s over the last five years. As I pondered that, I realized that all my suspicions had been confirmed: the fueling of the economy post-9/11 was done by refinancing and pulling money out of home equity for cars, HDTV’s, etc.

People don’t really realize what a precarious position our current Administration has placed us in. From alleged $3-6 TRILLION in debt (which could’ve financed all highway infrastructure needed repairs, given us national healthcare *and* shored up Social Security) to the plummeting dollar, we’re in pretty bad shape.

Of course, the protestations of “History will be my judge” from President Bush is all about how those trillions spent would be a moot point — more so the complete collapse of the US economy and, subsequently, the worlds — if *we* don’t get our fair share of oil and the Chinese and Indians do since it will take decades to ween the US off of our ‘addiction’ to oil.

To which I call “bullsh*t” since there has been ZERO leadership on alternative energy, conservation measures, or anything else.

These people don’t have sub-prime mortgages and in all cases have very good credit ratings. Some are being proactive about marginal expenses, but at this point it’s like putting your finger in the proverbial dam expecting it to stop an inevitable collapse. Trying to reconcile a multi-thousand $ monthly family deficit by trying to save $100 a month by not eating out as often is like thinking you’re going to make your mortgage payments every month by digging in the cushions of your sofa for change. Ain’t gonna happen.

Additionally, unless the price of natural gas falls dramatically between now and this winter consumers will all see this coming winter’s heating bills approaching or exceeding 150% of last years costs.

The only hope I see is if the dollar strengthens over the next few months. The biggest benefit is this scenario is that the price of crude oil could easily fall by $20 or $30. That still wont be enough however to counterbalance the inevitable consequences of 7+ years of cheap credit and household financial mismanagement.

With all these overhanging issues, there’s a very good chance that consumer spending will slow markedly and consumer confidence will continue to fall going in to the election.

What’s the message? Get ready for a national belt-tightening, and it isn’t going to be pretty. On the flip side, those with cash on hand will find very attractive opportunities in the U.S. stock market in late ’08 or early ’09.

I don’t believe it is the right time to pull back innovation or growth strategies. Focus on reducing waste in the organization — whether that means energy, materials, or time.

Most of the wealth that Americans lost was due to declining home values. This type of wealth was more perception than reality. The real problem is that the government is bailing out some of the Houses of Cards that were built on this funny money.

Thanks for the blog!