According to the Commerce Department, consumer spending fell 0.4% in 2009 -- the biggest drop since 1938. Now many of you will say that this is a good sign, because people are saving. And I agree. People are saving, but this necessarily means that the consumer economy must crash. Now, we've all heard about the reports about the 5.6% increase in GDP for the fourth quarter of 2009.
It was basically the result of slower inventory declines. Yes, the government's cash for clunkers and first-time home payer tax credit programs helped, but they were nothing but a costly short term pain reliever. The economy still has cancer and it is my belief that it is terminal.
US consumer spending rises less than expected
http://news.bbc.co.uk/2/hi/business/8491727.stm
GDP
http://online.wsj.com/article/SB10001424052748704194504575031611193012080.html
A couple things I don't understand about this number. First why is .4 percent the worst on record? You would think that the worst on record would be like 5 or 10 percent drop or something, .4 percent sounds so small to me. I know my online sales have continued to grow despite this downturn so I guess the retail business will always hold up. Secondly it seemed like most months retail reports in 2009 were showing positive reports, so one has to wonder if these reports were all downwardly revised many months after the fact.
ReplyDeleteThis is a recession/depression based on debt. Our leadership (both parties) is trying to fix it by spending money and going further into debt. All this is going to do is make the government hit the printing presses harder when the time comes to do something.
ReplyDeleteTake a look at the national debt. It is 12.3 trillion. Does anyone remember the period of 21% interest? I do. At that interest rate, the money that the government would have to spend would be negative. There are not enough tax receipts to cover that interest. Right now the budget assumes that the interest rate will be 1.5% and will remain that way out as far as the eye can see.
Can you say inflation? That is the only way out of this mess. Everything we have saved that is in US dollars will be worth a fraction of what it was before.