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“While the sources for the supposed increases in U.S. consumer spending are murky at best, the amount of consumer spending in and of itself is not a determinant of whether or not economic recovery is taking place.”
The banks are making billions and adding extra fees, mortgage rates are going up so banks will increase profits, the communications (cell phone) companies are making good profits and adding fees, the stock market is going up and up, so speculators, brokers and traders are doing well.
The big corporations with lower taxes are making money and cutting back on employees, or eliminating benefits. Government employees have seen no risk in their jobs.The Federal government is spending stimulus money like a drunken sailor, so construction companies are busy and making profit.
These benefits effect 30 to 40% of the population.
The other 60 to 70% of the population. did not necessarily start off with a high standard of living and probably lost money due to the downturn with significant percentages of pensions disappearing as well as work hours have being cut at many companies.
People are being told jobs are being created but most of the jobs are part time jobs with little or no benefits. Indeed, everyone knows someone who has lost their job. Food and energy costs are increasing; mortgage rates are going up even though the prime rate is still the lowest in history.
So it does not take an “economist” to know that many people are not confident with the state of the economy, and probably will not be confident until we have had a couple of years of sustained growth.
A high percentage of people have lost confidence in the banks, big corporations, governments and the economy, especially when they see the government giving away billions, and big corporations making BILLIONS, with little or no “trickle down” to them, other than the prospect of more taxes and reduced social services to pay for the governments spending.
Why Consumer Spending is Not Indicating Economic Recovery
Before It’s News | March 29 2010
The Commerce Department released figures for February consumer spending today, March 29th. The report indicated that consumer spending was up 0.3% in February, but personal incomes were flat. The savings rate was lower, though, dropping to 3.1% from 3.4% in January. Spending increases were highest for necessities, such as food and clothing. Spending on non-durables actually fell. Nevertheless, somehow the mainstream media looked at these figures and concluded, “Both the spending and income figures in Monday’s report point to a modest economic recovery.”
Now for a dose of reality.
If income is not going up, but consumer spending is going up, there are only three possible explanations. Consumers have either gotten increased credit and are borrowing more, they are spending savings, or they are selling assets. If they are spending savings or selling assets to support their spending, the economy is in very bad shape, somewhat similar to the way it was during the Great Depression in the 1930s. Since the savings rate was still a positive number, consumers were not taking more money out of their savings accounts than they were putting into them. So consumers were still saving, but at a lower rate. Read the full story from Before Its News
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