U.S. Dependent on Consumption to Survive
The American economy, in its current makeup, is utterly dependent on consumption to survive. Nearly 70 percent of our economy depends on people going out and buying goods. With nearly two-thirds of these purchases coming from foreign-made or foreign-owned products, the net result is an outflow of cash away from the domestic economy and into the rest of the world.
When our domestic consumption grew by 0.3 percent in February 2010, two-thirds of that growth went overseas to stimulate economic recovery in Japan, China, the E.U. or elsewhere.
On top of the fact that our consumer dollars flow overseas and out of our economy, there is the looming problem presented by low savings and stagnating income. Incomes in the United States has been out of touch with inflation for nearly a generation. There are working professionals in the United States who have not gotten a real “raise” to their pay in 20 years – any raises they did garner were trumped by overall monetary inflation.
According to BusinessWeek, growth in the consumer economy is preferable to a lack thereof, but with so little movement in net incomes growing consumption could simply recreate the 2000s bubble.
As the American economy begins to struggle to its feet, the last thing it needs is for people to start shopping and spending without regard for personal savings or personal finances. The last thing we need is to have our entire economy once again dependent on asset appreciation (prior to the crash our economy was largely driven by growing home values and mortgage refinancing).
Hopefully Americans, or some Americans, have learned a thing or two from the lean times and will not fall into the same trap. However, with so few schooled in strong personal economics holding on to a hope that Americans will act in their own long-term self interest may be a bit more than dreaming.