Spend or Save?
Last week it was announced that retail sales dropped 5.1% in July, sending yet another mixed message on the economy. All indications are that the recession has ended, but it is clear that the rebuild may be very slow.
Two-thirds of U.S. economic activity are derived from consumer spending. I do not see how that can continue in the wake of layoffs, declining home values, and all of the other negative economic news of the last year. A shift is going to need to happen, and one would assume that the massive amount of governement spending going on will accomplish that.
But it raises a question. During the easy-credit-fed economic boom of the previous 8 years, experts expressed concern that the U.S. savings rate was among the lowest of the industrialized nations. So which is it? If we are supposed to be better savers, how can it be that we also need to be spenders to drive the economy? U.S. Government seems to be speaking out of both sides of its collective mouth when it preaches need for increased savings while at the same time issuing checks to everyone and asking us to go buy TV's, cars, appliances, home improvements, etc.
Two-thirds of U.S. economic activity are derived from consumer spending. I do not see how that can continue in the wake of layoffs, declining home values, and all of the other negative economic news of the last year. A shift is going to need to happen, and one would assume that the massive amount of governement spending going on will accomplish that.
But it raises a question. During the easy-credit-fed economic boom of the previous 8 years, experts expressed concern that the U.S. savings rate was among the lowest of the industrialized nations. So which is it? If we are supposed to be better savers, how can it be that we also need to be spenders to drive the economy? U.S. Government seems to be speaking out of both sides of its collective mouth when it preaches need for increased savings while at the same time issuing checks to everyone and asking us to go buy TV's, cars, appliances, home improvements, etc.
If we do a better job of saving, who is going to do the spending?
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