Sep 30 2005
Spending Down
Statistics show that U.S. personal spending had its biggest drop since May 2002 in the midst of income drops.
We have long wondered what would happen to the economy once U.S. consumers started to work on restoring their balance sheets to fiscal sanity. For consumption driven economies, like the U.S., that could make for a serious recession — and a contraction of money supply should folks start to cut back their debt in a fractional reserve system. Of course, we know that politicians and The Fed don’t want that, but it would present another set of unprecedented variables for analysts to ponder. We remain in uncharted waters.
