Posted by: wtfwjd? | June 9, 2008

Dismal

Uggabugga:

This is all it takes for things to be set right:

What investors are going to be looking for in this week’s data are signals that the consumer is still able to spend despite higher commodities costs.

For the past five years or so, borrowing against inflated house prices was the source of spending money. That’s gone. Plain old (credit-card) borrowing isn’t sustainable. That leaves wage growth. But there hasn’t been any. The productivity gains for the last 30 years have accrued to corporations, not to labor.

Investors are looking for a free-spending consumer that doesn’t exist any more.

Maybe there’s an economist out there who can help me. Do we really have to have an economy that’s driven by domestic consumer spending? What would happen if we focused on production rather than consumption? On getting our balance of trade back in balance? (We have lots of empty shipping containers going over to China at tremendous cost — can’t we think of something to put in them? Something a bit more glamorous than chicken feet? Or college students?) Or, with fuel prices and global temperatures being what they are, what about a gov’t led initiative to save fuel, reduce greenhouse emissions & boost the economy by importing less junk? Make some of the junk here and do without the rest. Could less consumption ever result in a better per-capita GDP or standard of living? I would think so, but I’ve never really grokked macroeconomic theory.

Clearly, if we need to rely on people in the US buying more stuff to have a decent economy, then we’re pretty well fucked in the short term. How about long-term? Our political environment appears as myopic as ever, but if we were wishing for a good long-term plan that didn’t rely completely on domestic consumerism to fuel the economy, what would such a plan look like?

I’d be interested to hear people’s thoughts.

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