[thaumaturgy]

> It seems entirely possible that families are trying to put food on the table, whenever possible, rather than save for the future.

That's actually what I was trying to say, I probably just wasn't clear. I was responding to webXL's opening sentence, "When a consumer chooses not to buy something, i.e. commerce does not take place, saving occurs." I don't think that saving is occurring, I think that people are trying to put food on the table right now, as you say.

> How do you know if the middle class is healthy? Can you define middle class?

To be fair, I'm not aware of a strict definition of "middle class" -- it's one of those amorphous abstractions that everyone refers to without ever bothering to see if they're talking about the same thing.

However, if we define some basic properties of "middle class" -- owns a home (probably with mortgage), has some savings, has reasonable credit, owns two vehicles (for a family) of recent vintage and in decent condition, college educated, etc. -- I think it's pretty easy to see from the news of the last several years that they aren't doing too well these days. Their mortgage is likely upside-down if they bought their home in the last decade; their car is probably requiring more frequent repair; their credit probably isn't as good as it used to be; their savings are diminished; and tuition is expensive.

If you can find any recent good news for U.S. middle class families, I would honestly love to read it. :-)

[dmpk2k]

As an aside: are mortgages even a good thing? They seem to create their own market.

I.e. if there are no mortgages, people buy what they can afford and housing prices remain low. If there are mortgages, suddenly house prices skyrocket since buyers can afford vastly higher prices, making mortgages a requirement for owning a home.

A good position to be in if you're a bank; now you get a big slice of all action.

[thaumaturgy]

I'm undecided on that one. The theory of course is that it makes it possible for a family which can't quite make the up-front cost for a home to still buy a home, which consequently helps keep rents reasonable, which helps poorer classes get by.

But there are also the unintended consequences: people buy things they can't actually afford, like you said, and people begin to qualify for buying homes as investment vehicles, which really screws with things.

So I'm not smart enough to figure that one out.

[dmpk2k]

> it makes it possible for a family which can't quite make the up-front cost for a home to still buy a home

But does it actually have that effect? Once everyone is using mortgages, everyone is back in the same place as before mortgages.

To put it more concretely: before mortgages, houses might average around $100K because the average person simply cannot afford any higher. Once mortgages arrive, houses might spike to $300K, because your average person can afford that mortgage. So while the example family might not have been able to afford the $100K house because they had $80K, a mortgage won't help because now houses are around $300K.

So I don't quite grasp how this would affect rents. That seems to be an orthogonal issue.