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What the REAL American Economy is Doing
Pinnacle Digest writes: Too many times when economists dissect the 'economy', as Clif Droke explains in his recent editorial, what they’re referring to is the sales and revenue trends of multi-national corporations such as McDonald’s, Wal-Mart, Microsoft, etc. These U.S.-based multinational corporations continue to shine and do well abroad. If their sales are your focus, you might think the economic recovery since 2009 has been robust. However, to think that would be wrong. The fundamentals now underlying and taking hold of the US economy are worrisome.
Droke believes the heart and soul of any discussion on the US economy should be focused on U.S.-based companies which sell directly to U.S. consumers. And, more importantly, the overall economic state of those U.S. consumers.
The latest release of the Fed’s Beige Book suggested that overall economic activity continued to expand “at a modest to moderate pace” in June and early July.
Droke defunks the fantasy that when consumer credit is in expansion, incomes are rising and the economy should be growing. This is false. The more likely reason is that consumers are taking on more personal debt to cover rising expenses.
Sadly, Droke notes that, "Consumers have been spending more than they’ve been taking in, although both spending and incomes have been declining in recent months."
He remains focused on the 30-year cycle peak, which occurred in the year 2000. Since then, the personal income line has been making a series of lower tops. Droke states that, "This shows the negative influence of the 60-year economic cycle, which is currently in its “hard down” phase until 2014."
The recovery has been fading and should have been led by the combination of increased employment, earnings and spending among middle class consumers. We’re not seeing that, which tells us that this economic recovery is living on borrowed time and money.
Droke believes the economic evidence strongly suggests a downturn is near. He concludes "With the crisis in Europe showing no signs of abatement, and with China slowing down, this will add pressure to the global economy once we enter the final “hard down” phase of the 60-year cycle descent in 2013. The evidence is mounting that 2012 will be the last year of the post-credit crisis recovery, with 2013 likely witnessing the onset of another major recession."
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