Beware - Consumer spending is usually a lagging indicator.
One of the things I've been noticing this month is that some of the lagging indicators are slowing slight bounces, whereas the leading indicators are getting crushed even more.
That a sign to be careful, but a sign that we should get a faux bounce fairly soon.
Consumer spending is the problem. The supply-siders have run this country into the ground. The problem is a lack of demand. The consumers are too scared to spend any money than they have to, even if they are lucky enough to still be employed.
Also, a lot of the money is going to the wrong areas. Defense? No. Tax cuts. No. Large banks? No. It's time for the money to go to new temporary workers, small businesses, and consumers.
Huh? Consumer spending is the problem, so more money should go to the consumers?
One of the big forces driving of a lot of the irregularities that will, in time, have to be corrected, is the fact that most of the focus and energy of the world's economy has been on the US consumer (or actually if you want to be broad - Western consumers). It is simply unsustainable and is presently collapsing in on itself, most likely because the American consumer reach the point of peak debt saturation (my guess).
This problem really, in a certain sense, touches every area of this debt-deflation. For example, the US (and certain state governments) could not fund its massive pension and health care plans (which are growing at rates much greater than we can ever catch up with them) without this dynamic in place where the US can become a massive debtor nation backing up its credit on increasing the liabilities of the American consumer. To be fair, we could also not fund our massive military without this dynamic either.
Moreover, the growth in the rest of the developing world was based on placating the American consumer and undercutting the American wage level. This dynamic survived the last 25 years (its heyday was the last 15 years really) simply because we were able to replace those jobs with high-paying ones in the service and financial sectors. Well, as you can obviously figure, the service and financial sectors are in the midst of complete collapse here (even though certain half-assed attempts are being made at rebuilding it - see "cap and trade" for example - although that will undoubtedly result in a trade war of some sort with China - more later)
So what does this mean - we're going to have get a decent bit of our old production economy back? And the only way that will happen is through major wage cuts (or reduction/elimination of many pension/health care benefits, probably both actually) to compete with foreign labor.
When, as I believe will happen, this "financial crisis" or "credit crisis" hits full tilt (which we ain't anywhere near yet), expect it to become a "governmental crisis". And not just here.
