rankandfile, how can you keep consumption going? The liquidity glut (money printing and real negative interest rates) has finally fed through to inflation, and that takes time to reverse. The liquidity glut caused a consumption boom that made the prices of commodities and other goods and services become inflationary.
Oil demand is increasing faster than oil supply; for several years, oil has been going up in a steady climb, unrelated to the Israel and Iran issues. Oil was going up *long* before that started. Energy prices are set by the futures market, by supply and demand.
The Fed is not God. They cannot stop a recession. If the Fed increases the money supply or lowers interest rates to jump start consumption, inflation could rise to 8% or 10%.
We could have had a regular recession back in 2000-2001, and been done with it. Greenspan’s short sightedness gave us a the largest liquidity bubble that we’ve ever had, and all excesses correct, all bubbles revert to the mean.
We all need to remind ourselves that every asset bubble in history has reverted to the mean. Housing prices will come down. That is a very good thing.
Finally, young adults, teachers, police officers, librarians, and fire fighters can leave their parents’ homes and have a chance at buying their own homes. People will be able to buy a house with 28% of income.
Our economy will become diversified and productive, and no longer reliant just on buying, selling, and furnishing homes to each other, and borrowing money from Asian exporters to fuel a consumption lifestyle. Imagine how much better our country will after the recession!
Why should we wish to continue an economy that is 70% consumer spending, and dependent on Asian export countries to fianance it all? We have a deviant lifestyle. It reminds me of one of those couch potatoes. In aggregate, we are couch potatoes. Picture a big fat guy, on a sofa watching TV, surrounded by cleaning people, cooks, massage therapists, nail techs, and gardeners. Everyone waits him, while he hands out IOUs to pay for it all. He doesn’t have the cash to pay for it.
How much better if our GDP is 30% consumer spending, 30% research and development, 30% capital spending, and only 10% government spending?
If you are mad about the recession, write your elected officials. Perhaps Alan Greenspan should be brought to trial for creating the asset bubble and the foreclosures, bankruptcies, and personal pain that follow. I think it’s only fair to charge him and the entire Federal Reserve, Congress, the Senate, and the President with negligent monetary policy. Just my opinion, and I don’t really care if it happens. Just want to show where the blame lies, and who to get mad at if you don’t like recessions.
