The Good News is that the Bad News Could Have Been Worse

One attractive hypothesis for the U.S. consumer's stolid resilience this year in the face of a clinically depressed stock market, a visibly sweating Fed, and a general sense of confusion over where our next boom is coming from is that as an investor nation, we've developed a cheerful, almost Russian acceptance of the vagaries of speculation and the wages of sin.

Bubbles bloat and burst, 401(k)s wax and wane, stock options float away on the breeze, but life — and its attendant "bare necessities" (new cars, new clothes and other everyday luxuries of American existence) — goes on. Nobody on Main Street panicked when Clinton faced impeachment or when Rehnquist crowned a president; why should the moaning on CNBC scare us when unemployment is still under 5 percent? We've all learned the meaning of the words "correction" and "business cycle" — and as Phil Gramm said in the Senate Tuesday, "If this is the bust, the boom was sure as hell worth it."

Still, are we ready yet for a correction within our correction? Alan Greenspan told Congress twice that "the fabric of consumer confidence" has remained intact thanks mostly to two factors: Declining energy prices, which helps keep prices low and the Fed's rate-cutting hands free, and the super-robust housing market, which has allowed consumers to "extract a significant amount of equity" — whether through mortgage refinancing, home equity loans or plain old re-selling — from what is traditionally their biggest investment. Both of which have helped the U.S. consumer feel flush enough to do what he does best: consume.

So what happens Wednesday? First, the National Association of Realtors reported that sales of existing homes slipped 0.6 percent in June to a seasonally adjusted annual rate of 5.33 million units, down from a revised 5.36 million units in May. And the ministers of the Organization of Petroleum Exporting Countries let slip that they have indeed agreed — over the telephone, unable to wait until a planned sit-down in Vienna next month — to cut crude-oil output by at least one million barrels a day, or some 4 percent, to keep per-barrel prices up in the face of sagging global demand. (Meaning, sagging global prices.)

Now, nobody's trying to panic anybody. The housing market, by all indications, remains very strong — June's sales pace was still 2.9 percent above its year-ago level, and this June's figure matches the fifth-highest month on record. Any fluctuations that are taking place are happening in a historically sky-high range; analysts expect existing-home sales for 2001 to total 5.15 million, making this year the second highest on record.

And OPEC is all too aware of the fragile state of demand for its products these days — its self-interest lies not in choking off the most nascent of nascent U.S. recoveries (and really sticking it to the rest of the globe), but merely getting crude-oil prices stable around its new stated target of $25. And with U.S. crude inventories still teeming, that's hardly cause for the return of the White House's "energy crisis" speeches.

Still, every little bit hurts. Just because the housing market is historically strong doesn't mean we don't need it exactly that way — when analysts predict that mortgage rates will creep back up to around 7.3 percent this fall, that's not bad. But it's higher. And just because $25 a barrel is nowhere near the $30-plus prices that cause presidents to sweat and drivers to fume, that doesn't mean it's not higher — for everyone from airlines to farmers to soccer moms and dads — than, say, the low-twenties it was at until the OPEC news hit.

This, of course, is how economies and business cycles work — imbalance and correction, wax and wane, supply and demand. Demand for housing gets high, mortgage rates follow. Oil prices go down; supply follows. A constant search for the ultimate price point at which longer-term profit and growth is — Greenspan's been using this word a lot lately — "sustainable."

But the fact that little corrections have already begun to happen in the two areas that have so far kept the big correction tolerable — and long before we've even seen that big correction melt into a recovery — illustrates why Fed chairmen, Wall Streeters, and other economic types are so nervous all the time. The recovery, they say, will happen before long — but only if consumers stick around long enough to lure businesses back into the fold. Until then, we're all walking a tightrope — and as philosophical as the NASDAQ roller-coaster may have made us, nobody on a tightrope likes to feel the wind pick up, even a little.