Why the Main Street Economy Isn't Getting Any BetterGo read the whole posting to get the additional details he provides. People really should make a habit of visiting his blog. He is well worth taking the time to listen to.
Today’s most important economic news: U.S. household debt fell for the seventh straight quarter in the first three months of 2010 as Americans continued to respond to the recession’s fallout.
But like all economic news, its significance depends on where you’re standing — whether you’re a typical American or someone at the top.
The common wisdom is that excessive debt-financed spending was one of the causes of the recent recession, so the news that household debt is dropping is being celebrated by business cheerleaders as reason to believe we’re on the mend.
Baloney. The reason so many Americans went into such deep debt was because their wages didn’t keep up. The median wage (adjusted for inflation) dropped between 2001 and 2007, the last so-called economic expansion. So the only way typical Americans could keep spending at the rate necessary to keep themselves — and the economy — going was to borrow, especially against the value of their homes. But that borrowing ended when the housing bubble burst.
So now Americans have no choice but to pare back their debt. That’s bad news because consumer spending is 70 percent of the economy. It helps explain why we so few jobs are being created, and why we can’t escape the gravitational pull of the Great Recession without far more government spending.
This bit from his posting is relevant to my previous post:
Here’s more news: A Federal Reserve report Thursday showed the net worth of Americans rose a fourth straight quarter in January-March. Don’t be fooled by this one either. That increase was almost entirely based on the stock market’s rise in the first quarter. ... Don’t be fooled by the cheerleaders. The economic news continues to be dismal.
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