I keep reading about how our slow economy in the first quarter was attributable to the harsh winter weather (it was damn harsh), which somehow kept consumer spending down. This I don’t understand. Aren’t there many malls indoors? In fact, most stores are indoors too. And, with so much commerce being done on internet sites, it would seem that people desiring to remain indoors and avoid the cold would naturally find themselves more, not less inclined to spend money in order to amuse themselves. Maybe ice cream sales would slow (I used to scoop ice cream in a Baskin Robbins, so I do know that is true. What a job that was, by the way!), but that’s about all that should slow in inclement weather.
My bet is that we are in the midst of a significant structural correction during which the heavy debt burden that exists will damp consumer spending and borrowing and economic vibrancy. It seems to me that we are completely unprepared on every level for the transition from an industrial to technological driven economy. Our economic numbers have benefitted for a long time from easy money policies and arbitraging cheap foreign labor. Those “answers” are probably not the ones that will carry us much farther, and their implementation during the past few decades will surely have consequences that we must deal with straight on.
Wishful thinking and outright lies will not help us, and both have the same impact. They both lead people into becoming complacent and into taking incorrect actions. China, which seems to me like a prime example of this, has felt to me like a house of cards for a long time. I have never believed that government actions can, in a command and control manner, induce sustained economic growth and vibrancy, and neither the central planners in China nor the American Fed have convinced me otherwise. The recent numbers from the housing industry are highly concerning, and that combined with reinvigorated consumer spending were to be what was to lift us to new economic heights. My bet is that the recent Fed tapering will be reversed soon and rates will remain low for well past the 2015 targeting that most economists today are projecting.