The Spending Consumption is Hurt

The spending consumption is having a real hard time; now it is falling in similar pace of the recession of the 70's and the 80's. The reason are two: the lack of confidence of the American about the future of the economy and the burst of the bubbles. The first will be very difficult to recover because of the uncertainty of economic future. The second is related to the economic impact of the consumers when the prices of the houses and stocks severely fall; many of the people used the present value of these assets to buy things because they waited to pay them with the increase of their goods prices. These assets have been having a positive trend in for many years, but now we know that many of them did not have enough bases. It is possibly the end of one model of highly leveraged consumption.

This macroeconomic indicator is very important for the American economy. It represents more than 70% of the Gross Domestic Product, and it has been exceptionally active since the beginning of the 90's. It helped to have many years of growth not only in the United States but also in the rest of the world.

In my opinion, we will have to wait a couple of years to recover a positive trend again. If we want an improvement in a shorter time, the government has to take policies to recover the consumer confidence; these policies have to be enough clear and sound. In my opinion, the government is the doctor, and the economy is the very ill patient; so the doctor has to give the exact medicine; sometimes the patient does not like it, but he must take it to recover his health. I see the doctor has not acted as quickly as the required situation, so the wrecked economy will not regain health soon.

A Terrific Time for Economists

Today is a great time for some economists but a terrible for the world economy. In this difficult time economists fight themselves to show how their different theories and models are the right to solve the crisis; now they have the central attention of the media for something good or bad.

Heroes and villains

The public perception have changed quickly. Some of economist are blamed for the situation. They were praised some years ago, and now they are found guilty with the current situation. While economists who were back in the stage in that time, they are now more popular and play a main role in finding a solution.

My perception

I recommend that we have to take care about easy solutions of the problem; the experience teach us that they do not exist. Many of the solution alternatives who were sold by my colleagues are oriented to spend more money or to decrease taxes; I agree with these alternatives, but I considered that these are only partial answers to the big question. In my opinion, the wrecked economy has to start running again, but it is necessary to fix and to rethink how we would like that the economy will work in the future. For example, firstly the soundness of the capital market has to be recovered from this unpleasant moment. Because I think the market is still the best for the economy and it needs perfect information, we need to improve the role of the public institutions to solve the information problem that in my opinion was one of the guiltys of this mess. The policymakers with enough information at the right time could have taken actions to avoid this dangerous position.