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I realize companies want to grow, expand, invest, sell and make money. My fear of a recession is based on the massive consumer debt built up over the years, and the fact that consumers can no longer extract barrels of money from the equity in their appreciating homes.

I hope the economy grows. But that requires that the tapped-out consumers continue to borrow and spend at historic rates. I am sure that is possible, but I am having great difficulty reconciling how it is possible.

It didn’t make sense to me that the “new economy” would support companies during the tech bubble that produced nothing and did nothing. The NASDAQ runup made no sense to me. Now, it doesn’t make sense to me that the consumer will continue uninterrupted now that the wealth-effect from housing appreciation has turned negative.

I am confused how consumers can find more debt to continue to shop till they drop, so predictions of growth don’t make sense to me. I’m sure I’m wrong, but I just can’t understand how the consumer can go deeper in debt that he currently is. I mean, there are frugal people who mostly buy what they need. These aren’t the people you need to stimulate the economy. You need the free spenders who party like no tomorrow, buy the latest gadgets, and spend constantly getting deeper and deeper in debt. I think those folks are going to hit a wall.

But like I said, I’m sure I’m wrong. I wasn’t wrong about the NASDAQ bubble or the housing bubble, but I’m sure I’m wrong this time and the tapped out consumers will find some new magic source of credit to continue spending like no tomorrow...

I’d be curious to see a breakdown of economic activity in the US, including that derived from consumer credit, consumers’ incomes, exports, etc. While I wholeheartedly agree that there will be a potentially dramatic pullback in consumer credit, I wonder how much of that will be offset by higher incomes (incomes rose in 2007, and I assume it should at least grow modestly in 2008) and higher exports due to a weaker dollar. I googled for this info but couldn’t find anything that fit the bill.

My fear of a recession is based on the massive consumer debt built up over the years, and the fact that consumers can no longer extract barrels of money from the equity in their appreciating homes.

If consumer debt was as massive as you suggest then household net worth wouldn't be setting a new record every quarter. Homeowner equity only accounts for around 20% of our net worth. We own a lot of assets other than our homes.

wealth-effect from housing appreciation has turned negative

The housing appreciation has been pretty consistent where I am. Always fluctuations, but that happens in every market. I do not live where there is mass new construction like in Florida, Calif and even Chicagoland. Anyone that buys a Pulte or like "publicly traded company" home will never see great appreciation. The history of homeowners in those corporation built homes never have good returns. The existing homeowner will always have the "like", but newer construction to compete with. Speculative housing has always been a risk. Those that "buy to flip" often are the first to be hurt.

Again I do not have that type of housing in my state, and land value stays high. Of course I live in a part of the country known for its tourism summer and winter. Home ownership is for the purpose of a long term investment. It is not a day trader mentality of investment.

I saw a report on how empty office buildings, think this was in a Calif city was once filled with attorneys offices-30 plus floors. Now, is what they call a telecom hotel--no people, just floors of telecom equipment for electronic commerce being conducted on the Internet.

I will always have wealth in my home whether market is up or down. Long term home ownership will continue to be the best investment out there.

If one stays debt free, then no matter what happens in the rest of the country or the world for that matter, you (I) will still have that feeling of financial security. More people of all ages, it's great to see, are following the Dave Ramsey (shout) we are debt free mentality (radio and FoxBusiness), as his shows continue to grow and pull top ratings even while running opposite Hannity (radio) and he sells out public appearances up to 10,000 seats. If you catch Dave's show, young kids are tuning in with their parents. How cool is that? Sound economics taught at home to be passed on to the next generation.

I feel that's an exciting, positive family snapshot reflective of a growing new attitude toward ~~spending~~ saving in this country.