An excellent piece of research by Neal Soss and Henry Mo of Credit Suisse may be found in the February 13th US Economics Digest. They used classical economic theory to examine the “elasticity” of changes in housing values and changes in the stock market with respect to personal consumption. They also examined the relationship of changes in disposable personal income to consumption. This superb work warrants discussion and examination. The implications for the recovery of the US economy and movements in our financial markets are profound.
Let us get into the meat of their research.