The New Direction

I may not be a noted Optimist, and this Post by Big Picture can be exact in nature and very true. Why am I so sanguine about the state of the Economy? It is not because of the Exit of the Bush administration without Criminal Charges being filed. It is not because of great faith in Our Presidential Candidates. The development of a Corporate sense of Social Responsibility cannot be the Cause. Some Defeatist sentiments would even claim it is the fact that I am in a medical class with low expectation of long life. I fear I must rely on economic fundamentals, but maybe not in a manner which is pleasant to All.

The average American Household could Save a remarkable amount of their Income by Purchasing for Cash, not Credit; I am not sure, but would estimate that the amount of Income paid for Interest on Debt has reached 11% of total Income. The fact unmentioned by most Commentators is the declining market for Credit expressed by American Households; a combination of excessive Product Prices and excessive Interest rates on the Debt. This means the pressures to absorb increasing amounts of Household Income for Debt Service has continued, while Household ability to accept this loss has been curtailed. No One has an adequate measure for the rate of Saving among American Households, but it is obviously on the Rise, as Households need greater liquidity to endure the more erratic Price changes on Basics.

It is in this area that I find the greatest optimism. The American Households collate larger amounts of liquid assets, and store this Income in short-term Commercial Paper. Their disconnect from Immediate Consumption is allowing them to pay off resident debt, and store a higher Assets value. The Process is only in its infancy, but will continue long after the current Commodity Crisis has abated. The reaction of Business will be equally as beneficial, as major Retail outlets must switch from provision of luxury items, in favor of the provision of functionality items simply to engender the Sales necessary for their survival. This is the Economic Turn which I await, thinking it can only be better for both Consumer and Business. lgl