Interesting Facts About US Consumer Spending During the Housing Bubble

I’m reading ‘The Crash of 2008’ written by George Soros. I follow a lot the opinion of Robert Kiyosaki and Peter Schiff on this subject so I thought it would be a good to get a more rounded-whole view reading the insights of other financial experts and economists.

I found this interesting fact about US consumer spending at that time:

• Half of all American GDP was housing related. Either directly through housing purchases, furniture, etc or indirectly through spending cash from refinancing their homes.
• Consumers drew an estimated $9 trillion in cash out of home equity.
• Home equity withdrawals financed 3% of consumption and was 10% of personal purchasing power

I don’t know if you could find a better definition of living beyond your means. It’s like there is something ingrained in the American mindset to live on borrowed money. It took some serious effort for me to break this mindset myself.

I still struggle to ward of the temptation to buy things but at least now I only have to fight off the temptation to spend money I have (instead of investing it), whereas before I had to fight the temptation to spend money I didn’t have.