Tuesday, March 30, 2010

Good analysis on GDP growth.

All those big growth numbers above 5 percent come from manufacturing to replace burned off inventory. There's little actual growth. Oh, and there's zero employment growth.

This piece is helpful except for this statement: "As this remains a jobless recovery, it must therefore become a consumer spending recovery." That doesn't follow at all. This attitude only results in consumers going more deeply into debt. Just because the American economy is currently driven by consumer spending doesn't mean that has to be true. The economy could just as easily be based on saving and investment rather than on purchasing shiny trinkets.

But, as long as the Fed continues to ram down interest rates, consumers will prefer spending to saving.