Report February 2003

Despite the collapse in stock prices, consumers have taken advantage of rising property values and low interest rates to continue borrowing and spending; debt in the personal sector now stands at nearly 130 percent of disposable income. What will happen to the economy when this buildup comes to an end? Our latest Strategic Analysis assesses the ways in which the economy will be affected in future years by its burden of debt.

Contents: Strategic Analysis: Is Personal Debt Sustainable? * Policy Note: The Big Fix: The Case for Public Spending. * New Working Paper topics include: Financial Policies and the Aggregate Productivity of the Capital Stock; Does the Stock of Money Have Any Causal Significance?; “New Consensus,” New Keynesianism, and the Economics of the “Third Way”; Is There an American Way of Aging?; Why the Tobin Tax Can Be Stabilizing; and the Persistence of Hardship over the Life Course. In Institute News: Announcement of a new research director and the Institute’s publication of Leon Levy’s The Mind of Wall Street.