Falling Family Income

The Fed has come out with its Consumer Finances survey for 2004, and Family Income dropped 2.3% when adjusted for Inflation. This is not really new or unexpected, simply a verfication of what Economists expected, considering the slow rise in Personal Income alongside of rapidly rising Prices--especially in Energy and Food. The magnitude of the drop, though, leads one to endure some Chills.

The loss has been totally financied by Consumer debt increases, which cannot continue forever. Debt loads among the Consuming Public are at historic Highs in absolute terms, and reaching toward historic Highs in terms of percentage of total Income. Something will have to 'give' sometime. The Fallout from that collapse may be very economically injurious.

What Scenarios could We possibly expect from such a collapse?

1) Our Current Accounts deficit will not alter drastically--itself a Problem--as World Consumers of American Goods will stop Buying when American Consumers stop Buying.
2) There will be significant Layoffs in Retail and Merchandizing, those areas most likely to produce additional Welfare transfer payments.
3) Corporations will reduce their Production schedules, as they lose Sales in their most lucrative, Cash Cow products.
4) High-Income increases--which buoy up the bad news of overall Family Income--will start to decline as the proceeds from Corporate Profits disappear.

Government will not even much affect the Above conditions, as its own Debt ratio is too high, and Expenditure levels are already excessive. Economic policy based upon Government action in the Markets are destined to failure. What Americans really need Now is less Consumption, and more Paying Down of Debt--both Government and Personal. lgl