Pity the US consumers. Their ability to sustain spending is already challenged by the declining availability of credit, a negative wealth effect triggered by declining house values, and a lower standard of living as the result of higher energy and food prices and a depreciating dollar. Job losses will accentuate the pressures on consumers, leading to income declines and a further loss of confidence.
Producing more while getting paid less had nothing to do with this.
I love punditry like this. It's so very, very serious, and so very, very cattle-like in its rolling four-footed stupidity.
Also, 'negative wealth effect' - isn't that a wonderful phrase?
I hypothesise that if I choose not to believe in reality then absolutely none of this will effect me. Ad astra per aspera
The money that people have been withdrawing from their HomeATM® was measured in the billions and kept the US out of recession for years. In 2000 and 2001, the GDP was so low it was only the borrowed money that people were spending that kept the nominal GDP positive.
But alas, the machine closes when the wealth effect doesn't feel the same...in fact, the wealth effect of the decreasing value of the house and the bank that won't lend is...here it comes...a negative wealth effect. Never underestimate their intelligence, always underestimate their knowledge.
Frank Delaney ~ Ireland
