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In article <[EMAIL PROTECTED]>, [EMAIL PROTECTED] (Andy) wrote:
In the 1 Dec 2003 NY Times there was an article title "Why Americans
Must Keep Spending; " http://www.nytimes.com/2003/12/01/business/01econ.html
The article describes how the depth of recent recession was moderated by growth in consumer spending during the recession, and how the recent economic recovery has been financed by even greater growth in consumer spending.
The article also says that this economy saving growth in consumer spending has been financed *not* by increased earnings but instead by: (1) people taking on more debt, (2) and withdrawing equity from their homes by means of refinancings, and (3) tax cuts.
The article asserts that consumers must keep up this spending growth for the economy to keep growing.
Given that tax cuts are just another form of borrowing (since the
budget is in deficit) this means that at present our economic health
depends on ever increasing borrowing to finance consumer spending. What the article doesn't address is what the endgame is for this
scenario. It seems obvious to me, though none of the experts are
addressing it, that a nation cannot successfully depend on increasing
consumer debt forever; at some point the minimum payments will be so
high that the consumers can't borrow any more. Then the borrowing
will level off, and that will cause consumer spending to level off
and/or drop, and then the economy will go into a depression. Or am I
missing something?
Nope!
Our nation is doing the same thing with our trade deficit.
Of course we are increasing our spending on our military. It is larger than the next ten nations with highest military spending.
We will eventually go TAKE what we want.
-- Bob Mounger
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