Consumer spending accounts for about two-thirds of the US economy

The fact that consumer spending represents such a large portion of GDP is in itself the major problem of the US economy, forget about unemployment and the rest. The very fact that the US generates GDP through consumer spending at such a high proportion means that it is relying on the output of other economies creating cheap goods, or relying on credit subsisting on real estate – the very backbone of the US economy is in fact in the real estate prices. A lower value on real estate, and a lack of liquidity among most Americans (the economic climate and low interest rates discourage savings) has already resulted in a severe blow to the US employment rate and economy.

The way most news reports put the situation intimate that consumer spending is the ONLY way to correct our depressed economy, and are obviously looking for a quick and dirty way of propping back up a bubbly economy; this favors those who have liquidity and will result in the destruction of those that don’t. The best solution to this problem is to simply force our government to stop deficit spending. It was government spending in the 80′s which really disheartened people from saving their money, which would be evaporated due to inflation. American economists have mutated into consumer spending fanatics, based on our previous success of creating the world’s largest economic Ponzi scheme. They eschew to idea of creating a stable situation where our economy is not reliant on cheap debt and high consumer spending, and lower government spending.

Increased personal and national debt is not only unseemly but also destructive to a democratic form of government – as each new bailout or batch of unpaid-for projects results in higher debt to the Federal Reserve and cash-laden countries such as China and Japan, and adds further imbalance to the ratio of government to private jobs. Already, many Americans are digging themselves into a debt hole, where their destinies are not decided by themselves but instead by their lender/owner. Personal savings per-capita in the US is non-existent, and all liquidity is financed. This doesn’t seems like a gigantic problem until interest rates start to rise, which they eventually will. The government is already pressured into writing more treasury bills because of the huge portion of the pie it devotes to military spending and the national debt. (See 2010 spending pie chart)

The last two months have witnessed a decrease in momentum of an economic upturn, which may signal we are approaching equilibrium stage. Most likely the government will try to initiate a new round of ‘austerity’ measures, which is another way of saying “let’s print more money!” Let’s hope that this will not be the case, and that free market capitalism will once again reign supreme, and that some day the government will spend less than what it actually collects. Keep in mind, you are in charge of electing government officials!