Exciting Consumption

Consumption results in economic growth. The problem is, will you consume more when your future is uncertain?

This leads back to the current global recession that we're having. Almost all the major developed countries are in recession, which is going to lead to a global reduction in consumption. The high levels of income disparity will also mean that majority of the world population is going to get hit harder. The impact is as of what you see now. Not pretty...

When your future is uncertain, and there are problems with cash flow, the natural reaction is to reduce consumption. This leads to a vicious cycle where goods and services are not being consumed, leading to a reduction of jobs, which leads to more reduction of consumption, etc etc.

The only way to jolt the economies is to introduce sustainable consumption. This is easier said than done. The latest US household saving rates was 0.4%. Judging from the news, this is definitely on the way up. The minimum should be around 10%. Just imagine... From 0.4% to 10%. The impact on the reduction of consumption will be humongous.

That means those other rich economies better buck up on their spending. The world has been too reliant on the US for consumption. Exciting domestic consumption should be the way to go but most took the easiest path, which is export. Now this error in judgment has come back to haunt them.

The US cannot and will not do anything to help. They have to clean up their own economy first. It leaves to the rest of the countries. They would have to make their own country rich enough to consume goods and services, and not restrict consumption to selected groups.

Is this going to be a short global recession? I think not. I'm still of view since the start of the year that this is going to be comparable to the great depression.