Why The Bursting of the Housing Bubble Will Bring About the Modern 1930s

Thomas Au is author of “A Modern Approach to Graham & Dodd Investing.” This article was previously published on TheStreet.com’s “Street Insights.”

*The bursting of the housing bubble means that band-aid has been ripped off the country’s Achilles heel, the cash-strapped average American consumer.
* The resulting two-decade pullback in living standards would represent “the modern 1930s.”
*The promise of the 1990s will be fulfilled only in the 2020s.

Richard Suttmeier on Real Money hit the nail on the head when he said yesterday. that the real estate explosion is about to implode. Like him, I believe that the subprime lending collapse is not just a speed bump in the “New Economy.” Instead, it is a sign of wider problems in mortgage lending that threaten the viability of the New Economy itself. That’s because the collapse of the housing bubble means that a major “band-aid” has been ripped off the country’s Achilles heel, the cash-strapped, savings short American consumer, exposing the scab underneath.

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