US economy gathering steam. Part II

MattK · 02-27-2004

US Consumers are Running on Empty

quote from article:

"According to Greenspan, it seems that we must be grateful to the Fed for its loose interest rate policy. Without this policy we would probably be suffering a terrible economic slump by now. In short, according to Greenspan the low interest rate policy of the U.S. central bank has strengthened consumers' and businesses’ financial conditions. Our analysis, however, disagrees with this. Rather than showing strengthening in financial conditions the data demonstrates that the exact opposite took place.

Thus the household liabilities-to-assets ratio climbed to a new record high in Q3 of 0.185 from 0.183 in the previous quarter. Furthermore, the outstanding consumer credit-to-personal income ratio stood at a record of 0.214 in December. This record high ratio indicates that the pace of consumption by far exceeds the pace of wealth generation. This is likely to force consumers to curtail their borrowing and in turn curtail their expenditure in the months ahead."

02-27-2004	#9
MattK Members Join Date: Oct 2002 Posts: 97	US Consumers are Running on Empty quote from article: "According to Greenspan, it seems that we must be grateful to the Fed for its loose interest rate policy. Without this policy we would probably be suffering a terrible economic slump by now. In short, according to Greenspan the low interest rate policy of the U.S. central bank has strengthened consumers' and businesses’ financial conditions. Our analysis, however, disagrees with this. Rather than showing strengthening in financial conditions the data demonstrates that the exact opposite took place. Thus the household liabilities-to-assets ratio climbed to a new record high in Q3 of 0.185 from 0.183 in the previous quarter. Furthermore, the outstanding consumer credit-to-personal income ratio stood at a record of 0.214 in December. This record high ratio indicates that the pace of consumption by far exceeds the pace of wealth generation. This is likely to force consumers to curtail their borrowing and in turn curtail their expenditure in the months ahead."