Investment Money Not Consumer Spending Drives Economy???

[StClone]

Without comment, other than saying, not the typical belief system. Please comment on this as best you can as I am at a loss.

Sure, consumer spending accounts for approximately 70 percent of America's gross domestic product, and increases in consumer spending would provide the economy with an immediate boost. But a drop in consumer spending is not what ails the economy. In fact, as a percentage of GDP, consumer spending actually increased during the downturn, the Commerce Department's Bureau of Economic Analysis reports - from approximately 69.2 percent of GDP in the fourth quarter (October-December) of 2007 to approximately 71 percent of GDP in the April-June quarter of 2009.

So the conventional wisdom - that a sharp decline in consumer spending caused the economy's downturn - is wrong.

Read more: http://www.sacbee.com/2010/10/01/3071526/why-stimulus-doesnt-stimulate.html#ixzz11RbKKZIG

http://www.sacbee.com/2010/10/01/3071526/why-stimulus-doesnt-stimulate.html

[AdHocSolver]

1. Economies are demand driven. That article is no more than supply side economics nonsense.

Businesses invest when they foresee an increase in demand. Demand increases when people have money to spend and plan on spending it.

A business doesn't hire people and expand output, and then hope someone will buy their product or service. They research potential buyers to measure demand. If large numbers of people are unemployed, demand across the board will drop. When people have less money to spend, companies lay people off to reduce expenses. They don't hire more people.

Stimulus spending does work. However, it won't succeed in improving the economy in the long term when most of the goods we buy are manufactured elsewhere and imported into the U.S.

To sustain an economy, most of the goods we buy must be made in America by other Americans. Then those Americans will get paid with the money we spend, and they, in turn, will pay us for the goods and services we provide. Moreover, working Americans pay taxes supplying governments with the means of supporting services and maintaining infrastructure.

A functioning economy is a money circulatory system. When most of the everyday goods that we buy are imported, the money we spend leaves the country, and we go into debt.

The biggest economic problem for the U.S. is the offshoring of jobs and the huge trade deficit that offshoring produces. Control of U.S. trade has to be taken away from the corporate cartels, and this means getting rid of NAFTA, the WTO, the World Bank, the IMF, and all of their ilk.

What caused the economy's downturn is a sharp decline in consumer INCOME caused by job losses. Reduced income leads to reduced consumer spending, and then businesses reduce investment because of reduced demand.

[northernlights]

2. if we build it, they will buy...

but with what? acorns? :shrug:

[pokercat999]

3. My oak trees are dropping acorns by the bazillion so I guess

I'm an acornaire.