Dismal U.S. Consumer Spending to Drag Us Back into Recession?

Profit Confidential ^ | 28/06/2013 | Michael Lombardi

[Mastador1]

I’d rather she hit full internment in less than a few years.

[dalereed]

“consumers can t spend what they don’t have”

Why should consumers spend what they have!!!

I don’t and don’t give a rats ass about the economy!

[familyop]

"Dismal U.S. Consumer Spending to Drag Us Back into Recession?"

...since the later part of 2007. Less manufacturing production on U.S. soil, fewer jobs for men, fewer whole families, less spending, less revenues, eventual default.

Have fun. Enjoy the slide. Celebrate much smaller government after the bond collapse, repudiation of debt and and downward currency adjustment to reflect our trade imbalances and resulting balance of payments deficits. Before long, in the absence of local enforcement against new competition in real production, real makers will be producing again.

[grania]

When I was saying money spent locally has a greater positive impact on a community, I was referring to the multiplier effect. Traditional economics taught that it triples. For example, $100 spent at a night out at a game and dinner has a $300 positive impact on the community.

If that money goes in pockets outside the community, it isn't spent locally by those receiving it. It just makes sense.

[Xenophon450]

I don't believe that to be the case.

It isn't the flow of nominal spending that matters, but the production of real goods and services.

If an individual orders a good from outside of the community, then he certainly has benefited from the gains of trade. He valued that which he purchased more than the money he renounced. As no one was hurt by that, so the community also gains.

If the community walled itself off or simply isolated itself from outsiders, acting on this belief, then you would see a dramatic decline in the standard of living. Many individuals would have to return to a more broad array of tasks, and hence lowering the marginal productivity of labor. Many capital goods may become entirely worthless because they were valued for their contribution to trade. Spending may well rise, and the "multiplier" may well kick into high gear, but that would be inconsequential because you wouldn't be able to buy as much. The fall in the demand for money would simply raise prices.

The second problem is that of the multiplier itself. The multiplier assumes a rigid mechanistic link between purchaser and the subsequent chain of purchases. However, each decision to spend is ultimately made by the individual -- in accordance with his demand for money. Saying that my purchase "causes" a new wave of spending is mistaken. It is the next individual's choice to initiate spending. Unless one assumes away human choice, and proceeds to treat human beings as mere dominoes; acting on their cause.