Pen-l folks may be interested in the following.
Seth Sandronsky forwarded a letter that said: >I have continued enjoying
your [Seth Sandronsky's] articles on commondreams.org since the last time I
wrote to you. Your latest article, "An Undertow of Underconsumption,"
discussed the spending slowdown by U.S. consumers in the months after 09/11.
[This "UU" is my phrase. Seth based his article partly on a talk I gave at
the Sacramento Marxist school.] Yet in another newspaper, it was reported
that "the Conference Board, a New York-based private research group, said
yesterday its index of consumer confidence surged to 93.7 this month. It
also revised up its November reading to 84.9 from a seven-year low of 82.2.
The surge in December was the largest single-month gain since early 1998."
>Huh? Huh? You seem to be saying one thing, and this newspaper seems to be
saying something else. What gives? Are U.S. consumers confident or
skeptical about the near future? <
I answered, adding some comments [in brackets]:
>>> there's a difference between (1) the problem of stagnant or falling
incomes and wealth limiting consumption and (2) the issue of consumer
confidence. The former refers to objective barriers, while the latter
refers to subjective expectations. People can be confident about the
future while cutting back on spending (say, as indicated by the poor
sales in retail markets this Christmas despite falling prices).
It's true that confident consumers can get beyond the limits of stagnant
or falling assets and incomes -- by borrowing. But US consumers are
already very deep in debt [relative to income], with defaults rising, so
that doesn't seem likely. [This situation is made worse by falling
employment, incomes, etc.]
In any event, forecasters usually don't have much respect for consumer
confidence numbers, since they tend to follow events rather than
indicate what's coming up. [Many journalists, on the other hand, seem to
assume that these confidence numbers are crucial.] The current surge in
consumer confidence may reflect the stock market surge and patriotic fervor
(the war on terrorism).
I don't know about the latter, but I don't think the current "bull
market" is going to last, since price/earnings ratios are still very
high by historical standards. This suggests that stock prices will fall
soon (though I can't say when). This is reinforced by the fact that
corporate earnings are falling.
Jim Devine
