9.09 MOAP Is Here
August 29, 2009
– Comments (9)
We know the consumer is 70% if the economy...and overlapping this is government spend consuming 50% of GDP. Combining the two, we pretty much account for the entire economy.
What if we were to learn in 9.09 that both of the above can no longer afford to spend much anymore for the first time in a couple generations, it would not take long for many to realize we really won't have much of an economy left and the viablility of our government and economic system would be called into question...pretty heavy stuff.
Due to the current leverage our nation is burdened with, the fallout could be rather dramatic and unprecedented in our nations history.....at least for the last hundred years and more.
What would happen if Americans learned America can no longer afford to spend?
AUSTIN, Tex. — Even as evidence mounts that the Great Recession has finally released its chokehold on the American economy, experts worry that the recovery may be weak, stymied by consumers’ reluctance to spend.
Given that consumer spending has in recent years accounted for 70 percent of the nation’s economic activity, a marginal shrinking could significantly depress demand for goods and services, discouraging businesses from hiring more workers.
Millions of Americans spent years tapping credit cards, stock portfolios and once-rising home values to spend in excess of their incomes and now lack the wherewithal to carry on. Those who still have the means feel pressure to conserve, fearful about layoffs, the stock market and real estate prices.
“We’re at an inflection point with respect to the American consumer,” said Mark Zandi, chief economist at Moody’s Economy .com, who correctly forecast a dip in spending heading into the recession, and who provided data supporting sustained weakness.
“Lower-income households can’t borrow, and higher-income households no longer feel wealthy,” Mr. Zandi added. “There’s still a lot of debt out there. It throws a pall over the potential for a strong recovery. The economy is going to struggle.”
In recent weeks, spending has risen slightly because of exuberant car buying, fueled by the cash-for-clunkers program. On Friday, the Commerce Department said spending rose 0.2 percent in July from the previous month. But most economists see this activity as short-lived, pointing out that incomes did not rise. Some suggest the recession has endured so long and spread pain so broadly that it has seeped into the culture, downgrading expectations, clouding assumptions about the future and eroding the impulse to buy.
The Great Depression imbued American life with an enduring spirit of thrift. The current recession has perhaps proven wrenching enough to alter consumer tastes, putting value in vogue.
http://www.nytimes.com/2009/08/29/business/economy/29consumer.html?_r=1&hp=&pagewanted=print
If the consumer can't spend, then there is not much revenues going to government. Without much revenues, the viability of government in its current form is called into question.
Millions will lose their jobs. Entitlements will be debated affecting over 100,000,000 million Americans. Many could and will likely question capitalism?
Our nation is about to confront its most difficult question in its history IMHO.....the abandonment of the system and principals our forefathers created and our politicians and bankers have recently emasculated.
For those of you that are regular readers of this blog...you are prepared. For many, it will be shock and awe. Now let's see how we as a nation behave...do we swim together or do we swim apart?
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