Worrying About Demand
First, the economy is bound to lose the stimulus of rising consumer debt.
…Second, the benefits from defeating double-digit inflation are fading.
His argument is that without the boost to consumer demand from increased borrowing and lower interest rates, the economy will stagnate.
I find myself unable to get worked up worrying about “the consumer.” As I wrote in my book, I think that investment is affected by stock market bubbles and panics, such as occurred in 1997-2001. In fact, the swing in stock market values was so strong that I believe it also did affect consumer wealth and spending. I think that progress and displacement mean that employment is always churning, and sometimes the transition out of declining sectors and into expanding sectors is less than smoothe. But I have come to believe it’s really misleading to think of consumer spending as the “engine of growth.”
The engine of growth is the accumulation and application of knowledge. If those activities are proceeding, then the economy will thrive.
For Discussion. Can a case be made that weak consumer demand will cause the economy to slump?