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Click to enlarge.
As you can clearly see, there has been an epic exponential trend failure in our long-term spending power.
Now divide that amount by our country's GDP. This shows long-term spending power as a percentage of our GDP.
Click to enlarge.
I am confident that we can eventually get back to 60%. All it would take is for our real long-term spending power to go up, our real GDP to come down, or perhaps even both.
Who thinks our real long-term spending power is going to rise much from here? Based on what I chose to name my blog several months before the first chart peaked (seriously), I think you can make an educated guess what I think.
Source Data:
St. Louis Fed: Custom Chart #1
St. Louis Fed: Custom Chart #2
5 comments:
Some might argue that I should factor in dividends (and rental income). I don't think I should.
If wages go to zero then dividends and rental income definitely go to zero.
The same is not true in reverse.
If dividends and rental income go to zero then wages won't go to zero. Someone, somewhere will still get paid something even in a profitless world. Companies tend not to fold until they actually lose money.
How could rental income go to zero? Easy. As a landlord, bring in $1000 a month in rental income but spend it all on maintenance and property taxes. You'll net zero if the house doesn't appreciate.
In my opinion, wages are therefore what ultimately matter.
Somebody at Angry Bear turned me onto:
http://www.amazon.com/Debunking-Economics-Revised-Expanded-Dethroned/dp/1848139926
and I'm about 2/3rds through it, and his thesis is all about how spending = income + debt take-on, and how modern economics is simply blind to this.
I try to bang this drum other places, but it's like talking to a wall .. .
wages are therefore what ultimately matter.
Of course, since rents are parasitical on wages.
It all gets down to actual wealth creation -- to create wealth requires labor, though automation is increasing the multiplier here, and the days where machines design, build, and repair other machines is not too far off. Maybe this century if we're "lucky", LOL.
Troy,
I try to bang this drum other places, but it's like talking to a wall...
From the first review of within your link:
As Keen writes of his peers,
...
"As anyone who has tried to banter with an advocate of some esoteric religion knows, there is no point in trying to debate fundamental beliefs with a zealot."
Oops. I worded that poorly. Should have double-checked it. You get the idea though.
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