Morning Edition told listeners that consumers are not spending because they are worried about their jobs. While they undoubtedly are worried about their jobs, they are spending nonetheless. The savings rate for the 3rd quarter was 5.3 percent, well below the post-war average, which is close to 8.0 percent. This level of consumption is a falloff from the peak housing bubble years when the saving rate fell to near zero, but it is still higher than we should expect when house prices fully adjust.

The point is important because it is ridiculous to expect increased consumer spending to lead a recovery. Households, especially those near retirement, must rebuild their wealth after seeing close to $6 trillion in housing wealth disappear. Those who bemoan the lack of consumption apparently still have not recognized the housing bubble and its impact on the economy.

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