Friday, February 12, 2010

Consumer confidence slowly returns

Consumer confidence has risen meaningfully from the depths of depression that prevailed in late 2008. But there is still a long way to go to get back to normal. Confidence is an important part of this recovery, because the financial panic that drove the recession also caused a major decline in money velocity. As confidence slowly returns, money velocity is beginning to rise (and money demand is beginning to fall); the money that was hoarded in the recession is beginning to be spent again. Rising confidence and rising money velocity are thus important drivers of this recovery. We're making progress, but slowly.


alstry said...


What are your thoughts that we are undergoing a structural shift in the economy where the ADOPTION of technology is now reducing the need for labor accross many industry segments?

Such that from the consumers' perspective, what might be a loss of jobs for consumers is actually a drive toward efficiency in the economy.

The issue arises if we becoome too efficient, and the need for labor(and real estate) decreases to the point where it impacts our current economic structure requiring a high labor force to fund government through taxes and earn income in a consumer based economy.

Areas where this can be seen right now is the digital delivery of movies, music, and games displacing CDs and video stores. We also see it at the automation of check in at airports and no automated parking ramps.

Is it possible that we become so efficient that progress is actually contraction in the consumer force?

Scott Grannis said...

What you are describing has been happening for more than one hundred years. When we figure out how to use labor to produce a given level of output, we see profits rise and the added profits eventually get reinvested and create new jobs.

alstry said...


You are absolutely right, and we could go back a lot more than 100 years.

The only question now is how quickly will the economy be able to replace the millions of workers and hundreds of millions of square feet of retail/office space displaced by the current adoption of very efficient technology.

In a highly leveraged domestic consumer based economy, this period in our economic history could be very convulsive and very exciting as we proceed forward with revolutionary changes.