The Real Economy and Long-Term Trends

Dow’s down a whole lot today. Is the end in sight? Probably not.

Financial sector troubles have started to affect consumption decisions on the part of individuals, with consumer purchases down 1.2% in September. Credit getting tight? No flat screen TV this year.

Why are chances good that the end is nowhere near in sight? Have a look at this awesome graph I found on the internets:

You see where that line starts going crazy? That’s around 1996, when Greenspan made his famous “irrational exuberance” remark. (h/t Yves Smith).

In closing, let me introduce you to another awesome economics term: overshooting.

Fasten your seatbelts, my friends. It’s gonna be a bumpy ride.