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We’re Heading Back Toward a Double Dip
Robert Reich, blog
The Truth About the Economy that Nobody In Washington Or On Wall Street Will Admit: We’re Heading Back Toward a Double Dip
Why aren’t Americans being told the truth about the economy? We’re heading in the direction of a double dip – but you’d never know it if you listened to the upbeat messages coming out of Wall Street and Washington.
Consumers are 70 percent of the American economy, and consumer confidence is plummeting. It’s weaker today on average than at the lowest point of the Great Recession.
The Reuters/University of Michigan survey shows a 10 point decline in March – the tenth largest drop on record. Part of that drop is attributable to rising fuel and food prices. A separate Conference Board’s index of consumer confidence, just released, shows consumer confidence at a five-month low — and a large part is due to expectations of fewer jobs and lower wages in the months ahead.
Pessimistic consumers buy less. And fewer sales spells economic trouble ahead.
… So why aren’t we getting the truth about the economy? For one thing, Wall Street is buoyant – and most financial news you hear comes from the Street
… Washington, meanwhile, doesn’t want to sound the economic alarm. The White House and most Democrats want Americans to believe the economy is on an upswing.
Republicans, for their part, worry that if they tell it like it is Americans will want government to do more rather than less. They’d rather not talk about jobs and wages, and put the focus instead on deficit reduction (or spread the lie that by reducing the deficit we’ll get more jobs and higher wages).
(30 March 2011)
Study: We Aren’t Going to Stop Buying Gas
Alexander C. Hart, The New Republic
… According to research by UC Davis’s Jonathan Hughes, Christopher Knittel and Daniel Sperling, Americans are now less responsive to increases in gas prices. In the late 1970s, a ten percent rise in the cost of gas would lead to about a three percent decline in the amount of gas consumed. In the early 2000s, on the other hand, gas prices would have to rise about 60 percent to provoke a similar decline in gas consumption. The researchers theorized that this might be because spending on gas is now a smaller fraction of total monthly income or because cars get better mileage now, meaning that cutting back on driving saves less gas than it would have in the 1970s. But either way, their research suggests that even if gas prices go higher, we’re unlikely to see Americans buying substantially less gas.
(30 March 2011)
The 36-page study is online as a PDF. -BA
Share the Risk and Share the Harvest
Robert J. Shiller, New York Times
NOT so very long ago, most Americans lived on farms, with three generations under one roof: grandparents, parents and children.
Farming was — and still is — a risky undertaking. Sometimes, you have good weather and abundant crops, sometimes bad weather and meager crops. How did our forebears manage their risks, which were as significant for them as the booms and busts of our 21st-century economy are to us?
In good times, all three generations consumed a lot. In bad times, all three consumed less. The risks were spread among the extended family. This is risk management at its most basic level. It is called sharing.
The farmers worked hard, and when they grew old, they were supported by the next generations. The elderly weren’t treated differently. Everyone shared in the good and the bad, with adjustments for health and special needs.
Let’s apply modern financial thinking to the old-time farm. Rather than sharing, families could set up traditional pension plans like the ones now established for state government employees. In this situation, the extended family would guarantee some of their working adults a fixed income when they retired.
(19 March 2011)
