AMERICAN CITIZENS MAY SAVE AMERICA
First the Obama administration sought to convince us that the economic skies were falling. Now, it argues that the recovery sun is just around the corner. If only, as the Washington Post notes, reality had something to do with it.
The president and the Federal Reserve chairman voiced cautious optimism yesterday that the economy could be beginning to stabilize. But the economy wasn't cooperating.
Retail sales dropped sharply in March, the government reported, and wholesale prices fell steeply. Both pieces of data underscore the hard slog the nation faces to emerge from its deep recession and the limitations of more optimistic talk from Washington. The stock market fell 2 percent, as measured by the Standard & Poor's 500-stock index.
Administration Keynesians are spending borrowed money on trifles ( such as 17,600 unneeded cars) rather than on the essentials such as refineries and nuclear plants to prevent the American economy from being held hostage by oil tyrants yet again. All the administration wants is for Americans to renew their reckless spending which has been responsible for the economic collapse in the first place.
But astute citizens are refusing to go along. Instead of spending, they are SAVING big time. As Stephen Roach writes:
Fortunately, the American consumer is smarter than the quick-fix Washington mindset. Shell-shocked families – especially some 77 million baby boomers for whom retirement planning is an urgent imperative – know they have no choice other than to save. The personal savings rate has risen from 0.8% to 4.2% in the past six months alone, and is on its way to a new post-bubble equilibrium that I would place in the 7.5% to 10% zone.
A retrenchment by the American consumer should be viewed as a wake-up call for other nations to fill the void by stimulating their own consumers. A globalised world needs to move from one consumer to many.
The Depression Foil blinds policymakers and politicians to the imperatives of global rebalancing. This crisis and the wrenching recession it has spawned are all about a destabilising shift in the mix of global savings and aggregate demand. That mix needs to be redressed. The excess spenders need to save and the excess savers need to spend.
Policies that encourage such rebalancing will put the world economy on a more stable and sustainable path and go a long way in avoiding another crisis like this in the future.
In other words, Americans are going to do what their government refuses to do. Force the world to change in a manner beneficial to all. Americans are also beginning toPROTEST) in hope of affecting counterproductive government policies. They know that government spending and redistributionist policies pose the greatest danger to their and the country's future economic, though not only economic security.
Yes, Americans may just save America. Bless them.
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