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reply to Dogfather

Re: And in a year they'll be wishing they hadn't

I'm no economist but I'm not so sure that a chart showing that GDP and personal disposable income growth in the Reagan years highlights and boldfaces a story of success.

In 1982, the US personal savings rate was between 10-12% of personal income. This has steadily declined to essentially 0% today. Maybe I'm reaching here, but would the growth in both GDP and personal spending merely be a function of US consumers unloading their personal savings while simultaneously loading up balances on credit cards and other mechanisms of debt. In my opinion, today's recession has been a long time coming. I've read several articles in 2008 quoting that this was the first year in which the US personal savings rate dropped below zero. An even sadder statistic is that the savings rate spiked to 4-5% in the quarter that this year's stimulus checks were mailed. When an average check in the amount of $700 creates a spike of that magnitude, it speaks volumes about how close this country has walked up to the proverbial cliff.

In my opinion, the growth of the 80's credited to Reagan was just the beginning of a dangerous addiction to debt by the average Joe. Advances in computing technology at that time allowed easier and cheaper tracking of all this money, further allowing more and more people to attend the party. All this debt has been shuffled around, sliced, diced, and repackaged. This reminds me of the old joke of trying to pay your Visa with your Mastercard.

I truly hope the economy can recover but consumers won't be the ones to make that happen as they have in the past by simply spending more money. Conditions will probably worsen in 2009 and 2010 before they get better. Many fail to realize that some of the larger and highly publicized layoff announcements totalling several hundred thousand workers have yet to be executed. A majority will be completed by the end of 1st or 2nd quarter 2009.

I hope that I'm wrong, but I think that this time next year will be far worse than it is today. We may even be fooled by good economic statistics in the first half of 2009 as recently laid off workers get lump sum severances and many receive eagerly awaited 2008 tax refunds. Not to mention another potential stimulus check that the rumor mill has been circulating. What really scares me is Obama's committment to phase out our presence in Iraq in his first 18 month. I'm all for it but where exactly will all these troops go? Law states that previous employers must rehire military personel upon return. Some large companies even true up the pay difference between the private sector job they left and that in the military. Either way, the war has reduced corporate payrolls. If Obama brings the troops back to occupy slots at US bases currently filled by reservists pulled from the private sector, corporations are obligated to rehire them. That could spell even more layoffs in 2010 and beyond if current trends continue. Or, sadly, it could even sway a Democratic legislative and executive branch to keep the US war machine humming.

What a clustermess


Agreed. However, please try not to point out to many rationale statements in one post. It might confused them, and these types confuse easily. If not given a proper serving of freedom fries, war, unchecked spending, and big brother, their heads will pop. With that stated, Americans save less now than at any time. Disposable income really isn't a measure of anything truthfully. GDP and inflation are the true measure of quality of life. If your income, when adjusted for inflation is increasing, then you are doing "OK". Disposable income is merely how much can you sink yourself in debt. It doesn't mean you're making more. It just means you're maxing out more credit cards and borrowing.