Show Me The Money

Sure, the marketplace is swayed a great deal by psychology. And all the recent golly talk about recovery, green shoots, glimmers, turnarounds, no longer falling off a cliff, et. al. have made many people a bit more optimistic, while turning some investors positively glassy-eyed and slack jawed with glee. But when push comes to shove, there’s only one that that brings an economy alive: Spending.

Seventy percent of spending in our economy comes from individuals, 30 percent from businesses, mostly in the form of investment. And to boost this real economy (forget the bizarro rigged machinations on today’s stock markets) consumers and business must have more money to spend and be willing to spend it.

That being so, show me this money.

Still rising unemployment means less money in the hands of consumers. Severely cut back credit card limits mean less spending power in the hands of consumers. Much lessened home equity that can be borrowed against means less money in the hands of consumers. While most of the extra tax cut bucks in the paychecks of still working consumers is being saved by people who are scared.

Show me all the extra money consumers will have to spend to get us out of this economic downturn. Where is it?

As for more business spending, the other 30 percent of the economy? Tighter lending standards by commercial banks, cutbacks in credit lines for businesses, these realities aren’t going to boost spending. Neither will the far more conservative practices of businesses themselves in these lean times. Boosting inventories that haven’t been boosted in awhile may boost business spending a bit, but why have huge inventories when consumers aren’t buying?

So here, too, show me the money. Show me the business spending that’s going to get us out of this deep recession.

The federal government is trying to compensate for all this non-spending. It’s trying so hard our national debt is entering the realms of the unspeakable. But most of this money is actually going in the back door of banks to improve their financial health, and damn little is being shoveled out the front door to help the rest of us.

“Government” also means more than the one in Washington. The feds can borrow it or print it, but state and local governments must live within a budget and most are cutting these budgets (and spending) accordingly, more than offsetting extra federal contributions to the country’s spending pool. Think California in this regard.
Yet again, show me the money. Show me how “government” spending is going to get us out of this economic hole.

Naturally, I hope this analysis is dead wrong. That I’m missing some critical factor that will make the above argument seem silly. But all the fancy economic claims and rationales professional economists and analysts are peddling these days notwithstanding, is the spending power and spending willingness to get this economy well again anywhere in sight?

Tell me. Please tell me. Where’s the money? Show me the money.