Following an insightful piece only a few days ago, on which I commented here, Wall Street Journal writer Kelly Evans provided another thought-provoking "Ahead Of The Tape" column this morning.
Evans noted the difference between soft measures of consumer sentiment and positive growth, albeit anemic, in recent consumer spending. She writes,
"The Commerce Department is expected to report on Wednesday a 0.6% inflation-adjusted gain in consumer spending for October over September, following spending growth of about 3% annualized in the third quarter."
As have Doug Dachille and David Rosenberg, Evans credits government spending, citing "tax rebates and extended jobless benefits with helping to boost incomes- and spending. As a result, U.S. inflation-adjusted disposable income has risen slightly since the recession began."
She quotes a Normura Securities economist as saying,
"The key question is what kind of consumer do we have in the middle of next year" when most of the government programs have run their course, Mr. Pandl says, "There will be a reckoning at some point."
A reckoning, indeed. Alan Reynolds has noted that Keynesian-style interventions have merely deepened and prolonged economic recessions. With the federal government's stream of such programs in the past eleven months, including a $787B stimulus bill, continuing extensions of jobless benefits, "cash for clunkers," "cash for caulkers," and more, one can only wonder how badly the so-called "recovery" will become once all of this non-private sector spending ends, and we are left with real demand from real consumers' real incomes.
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