Quote:
Originally Posted by Nebe
Make sense?
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Not quite.
Since 1987 Alan Greenspan opened up the floodgates to the money supply, to bail out Wall St. on several occasions and make a lame attempt to ignite growth during downturns.
This hot money found its way into the hands of consumers in the form of cheap and easy to get mortgages and zero percent APR credit cards.
Folks went nuts with the spending on houses and imported crap.
Things were great as long as house prices kept going up and rates stayed low. People could buy and flip homes homes with artificially low monthly payments, extract home equity, and buy more imported $hit from overseas. Folks didn't save a dime.
Then the bubble popped, mortgage payments reset to much higher payments, and folks got caught with their pants down.
All the while, the weak dollar (caused by money printing) and demand from Chindia made gas prices skyrocket. So we end up spending more on imports (more $/bbl crude).
Folks chose to make bad decisions with cheap money, and consume rather than invest and save.
Now, I understand we're a service economy and we don't make jack anymore. We don't export anything but jobs, it seems.
This is a reflection on the natural evolution of economies, but also a failing on the part of U.S. industry. Example: Do the Big 3 build anything right now that we want to drive? Why do so many people drive Japanese cars now?
On top of that, investment and savings that you and I make goes into things like building factories and upgrading infrastructure here in the States. All of which produce a future benefit.
Economy = Consumption + Investment + Gov't Spending + Net Exports.
Which one of these line items produces a future benefit to us?
Hint:
Not consumption!
Not government spending!
We're importing more than we export!