More good news? The Washington Post views the record personal savings deficit as "giving the Fed ammunition" to justify a rate rise. But the other side of the coin is that it makes the upward adjustment of interest rates precarious. An increase in debt service costs has to either erode disposable income available for consumption or accelerate the upward spiral in the personal savings deficit. Balanced budget hawks always used the analogy of the household to warn against the danger of government deficits. If the analogy holds for the government, what about the households themselves? Perhaps it is just coincidence that personal savings went into deficit at the same time the fed pulled the October rescue from the "global meltdown" of the financial system out of a hat. Or maybe personal debt was the hat out of which the last rescue was pulled. If it's the latter, I'd like to know what is the NEXT hat out of which the NEXT rescue will be pulled? Seems to me the extraordinarily VOCIFEROUS equanimity about the expected Fed rate hike (due out at 18:15 GMT today) is as "profoundly silly" as the left's propensity to claim the sky is falling. The firmament is NOT well-attached, Doug, it's levitated. BLS DAILY REPORT, TUESDAY, JUNE 29, 1999 >Personal spending rose 0.6 percent in May, outpacing the 0.4 percent gain in >personal income, the Commerce Department reports. Personal saving hit a >record low of minus 1.2 percent in May.. . >The nation's savings rate hit another all-time low in May, as >Americans' spending rose faster than their income. Economists say the >figures give the Fed more ammunition to justify an expected interest-rate >increase this week. ... (Washington Post, page E5)_____Spending rose in May >at a faster pace than income, helping prolong the economic expansion as >consumers go deeper into debt. Consumers continue to spend on cars, >appliances, electronics, and clothing, making the U.S. economy the world's >strongest. ... (New York Times, page C12)_____U.S. consumers continue their >giddy spending in May. ... (Wall Street Journal, page A2). regards, Tom Walker http://www.vcn.bc.ca/timework/worksite.htm
