Billionaire Warren Buffett said Monday the economy is improving but at a very slow rate and consumers are still not spending much, so job growth will remain slow.
What Buffett doesn't say is that a consumption dependent economy will always struggle to produce high-paying jobs. This is why the housing market was/is so important in the United States. As home prices saw no limit behind easy credit and unrealistic assumptions, consumers used the illusion of wealth (home equity) to spend more from 2003 to 2007. The increased spending, however, did not create sustainable, high-paying jobs. That is why it was often dubbed as the job-less recovery by the media.
Today, we still focus on spending and consumption, and wait for any sign of price recovery in housing market as an indication of the return of the halcyon days of consumption-driven GDP growth. Securitization of debt and structured products collapse as all but stopped the credit Juggernaut. As a result, there will be no speedy return. As long as we consume and pay with paper, liquidity based recoveries will always be synonymous with jobless recoveries.
Source: finance.yahoo.com
0 comments:
Post a Comment