Wednesday, January 9, 2008

declining consumer spending

if you care about the US economy, you should know the following:

the Wall Street Journal has reported that Goldman Sachs is expecting a decline in consumer spending as a result of the housing/credit problems.

considering that 70% of the US economy is consumer spending, this factor is the key difference between a soft landing recession, a hard one, or a depression.

the marginal doomsday blogs that i read have been calling for a declining consumer for months, but this is Goldman Sachs, a serious firm that trades on its credibility.

Sachs also thinks the Fed will lower the reserve rate to 2.5% by the end of the year, hoping to help all asset owners (homedebtors) inflate their way out of trouble. and somehow they think this is a good idea. if they really do this, gold at $880/oz will sound like a bargain.

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