Can Our Economy Improve?

Who’s going to do the buying that will propel economic growth moving forward?

Yesterday, we spoke about both of the dire realities of our economy and the glimmers of hope.  The question is: Can things improve?

The US has a lot going for it.  We have a country with a history of freedom and opportunity where anyone is free to accomplish anything  they put their mind to.  So yes, the American people’s entrepreneurial spirit should never be doubted as a force for economic expansion.  However, there are definitely a couple factors of concern to look at.

The US Consumer is tapped out and finally pulling back.  The first part is horrible news, but is has been slowing building for a really long time.  The second part is great news for each individual, which is at the same time bad news for the US (and world) economy.  The US consumer’s debt is now almost 4 times what the US economy produces.  This number has been growing and growing for decades.  It’s been fueling the expansion of our country and the world’s economy.

The average American has finally leveled off on the consumer debt.  The personal savings rate in our country was historically 10%, but in recent years actually dipped negative at times.  Meaning that on average Americans were spending more than they were making!  This is an amazing stat.  Not just some people, but the entire country as a whole was doing this!  Recently, we’ve seen this bounce back above 4%.

Again, this is great news for each of those individual families.  Hopefully they’ve  learned a lesson and will pull back on their spending to be more prudent about how they handle their finances.  But when we look at the economy, we have to ask:  who’s going to do the buying that will propel growth moving forward?  If for the first time in 50 years, Americans have finally decided that they can no longer afford any more debt, don’t you think this will have a negative effect on the growth of our economy?  It has to.  If Americans save 5% of their income annually, this will translate to $600 billion dollars that are not spent on goods which used to be spent on goods.  If we get back up to 10%, this is over $1 trillion dollars that is no longer spent.  This sort of transition takes a while to be absorbed by an economy before it can grow again.

The other thing to be concerned about is the government’s take-over of more and more of the economy.  The government has been bragging about jobs they’ve created, but a government job is not one that adds to the economic value of a country.  It is actually a drag on the other workers of a country because governments don’t produce anything.  No value is added to society, but a new cost is added instead.

As other areas of the economy are put under the control of the government, the more these areas will slow down.  This has been proven every time and in every part of the world that it has been tried.  Even though our country was started by people who had the wisdom and experience to understand this, in recent years we have increasingly turned to the government to fix our problems.  After a century of trying these things, the evidence is overwhelming that it does not work.  This is not an intellectual problem, but a spiritual one.

The Western Man has been turning away from God and towards Man for solutions to problems.  So we elect the most charismatic men who promise us that they will take care of us and each time we enslave ourselves more and more.  (I’m not talking about political parties here. President George W.  Bush was doing the exact same things at the end of his presidency that President Obama has stepped up this year.)

Tomorrow we’ll discuss one more big issue that makes this recession different from all the many others we’ve faced over the decades.

You’re invited to a free event Wednesday, November 18th in Austin to discuss these things in greater detail.  If you would like more ideas on how to prepare for this coming storm, please sign up for our free newsletter here.  If you’d like to read more about the spiritual realities behind what’s happening, read the series we just finished.

This post is Part 2 in the series Financial Outlook of the United States. To continue with this series, click on Pt 3. To gain more insight, you can read about the coming storm here and in Pt 1.

Photo credit: cjanebuy

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