• Obama, Watch Consumers And Learn

American consumers are being accused of closing their wallets. This is evidenced in three months of contracted spending into the end of 2008. The new year has brought more of the same, and consumers are being admonished for spreading “weakness.”

Politicians, economists, and the media, have strained to peculiar characterizations in describing the source of the current protraction in economic activity. Most renderings are not flattering to consumers, and are aimed at stimulating feelings of guilt or culpability. The use of imagery such as “weakness feeding on itself,” with the weakness being the consumers’ spending, borders on ridicule of the consumer. “Consumer confidence falls,” is another great headline we are subjected to. Why is there such negative perception attaching itself to what is in fact an extremely positive reversal of past detrimental behavior by consumers?

Consumers are not panicking the way their leadership appears to be doing. Taxpayers are being conscientious with their hard earned dollars. Consumers increased their rate of savings to 3.6% of disposable income in December, representing a significant month to month increase from a 2.8% rate in November, and overall a marked improvement from the only 0.8% of last August. Consumers are prioritizing their purchases, and cutting back on credit card use. This is a positive trend that will strengthen the likelihood of a return to economic health in the mid to long term. It also suggests that consumers are discounting endless prognostications, including Obama’s, of a restoration of the economy’s wealth and health within 6 months.

Consumers should ignore the mainstream media, the pundits, the economists and most of all should ignore implorations of “spending” from politicians. The economy will not be fixed in the short term, and believing otherwise is ignoring reality. The turn around can only be realized gradually through a diligent and patient ascent along a very gradual incline. Consumers are first taking care of absolute needs such as food and shelter, and they will then endeavor to save for an uncertain tomorrow. From those savings will emerge confidence that will very gradually ensue to gradual, rational, and conscientious increases in spending levels. Current signals strongly suggest that consumers have learned a lesson, and will in future spend within reasonable means of their disposable incomes. It is safe to expect that consumers will treat their homes very differently, and will no longer perceive them as rapidly appreciating sources of cash.

Government’s artificial injections of taxpayer borrowed stimulus billions, over and above normal and required spending, are unlikely to deliver reliable foundations for establishing solid and sustainable economic pillars. Does no-one sitting at the new Presidential round-table of experts understand that a $15 trillion dollar economy is a “long build?” Short term thinking is what brought us the current mess. Why agitate taxpayers through fright and terror? Is this an attempt to justify incomprehensible spending programs to placate special interests? Will this lead consumers to remain uninquisitive as to the structures of the bailout packages, and their lack of contractual arrangements? Is this an attempt to win over the almost 60% of the population strongly against the stimulus and bailout package Obama and Congress are implementing? Rebuilding of the economy will be a lengthy process, and other than providing consumers with incentives to continue their current trends, government should get out of the way of its materializing.

The political leadership should listen to American consumers. Listen and observe. Doing so would temper the rush to explode the National debt to 70% of GDP. You can help no-one else, if your house is not in order. Consumers are not rummaging for “boom times.” They are searching for shelter in stability.