"Dr. Austan Goolsbee, formerly the Chairman of the Council of Economic Advisers of President Barack Obama, is now a professor at the University of Chicago at the Booth School of Business. He appeared on “This Week” on ABC this past Sunday and made some interesting observations. Dr. Goolsbee stated that there is only one way to get out of the current economic morass. Most of the country thinks we need to cut expenses or entitlements since it is so clear that we dug ourselves into this mess with excess debt and promises we cannot keep. Dr. Goolsbee believes, as we do, that the only way to extricate ourselves from this situation is by “growing” our way out. He said that we have to shift away from the past economic drivers of the economy (consumer spending and residential construction) to corporate investment and exports. We doubt that corporate investment and exports will be able to substitute for the consumer and housing.
We agree with Dr. Goolsbee that the consumer is so buried under debt that we will not be able to dig our way out of this mess while consumers’ are paying off debt (or defaulting on debt) and trying to save more. The household debt more than doubled from $6.5 trillion in 2000 to about $14 trillion in 2008. The deleveraging process then began and household debt dropped to $13.2 trillion now (we expect it to drop below $10 trillion). With the enormous inventory of unsold homes (total of about 5 million including “shadow inventory”), we will not be able to depend upon the housing market to help our economic growth within the next few years..."
at http://pragcap.com/what-are-the-driving-forces-for-the-economy
We agree with Dr. Goolsbee that the consumer is so buried under debt that we will not be able to dig our way out of this mess while consumers’ are paying off debt (or defaulting on debt) and trying to save more. The household debt more than doubled from $6.5 trillion in 2000 to about $14 trillion in 2008. The deleveraging process then began and household debt dropped to $13.2 trillion now (we expect it to drop below $10 trillion). With the enormous inventory of unsold homes (total of about 5 million including “shadow inventory”), we will not be able to depend upon the housing market to help our economic growth within the next few years..."
at http://pragcap.com/what-are-the-driving-forces-for-the-economy
