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HomeOff Topics News & Politics › Former Reagan Adviser Lindsey: Real Shock to US Confidence Still to Come
10-15-2011 11:59 PM  6 years agoPost 1
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Former Reagan Adviser Lindsey: Real Shock to US Confidence Still to Come

Friday, 14 Oct 2011 By Greg Brown

Former Reagan adviser and Clinton-era Fed official Lawrence Lindsey believes that the real shock to American consumer confidence could still be ahead, a dire warning for the economy if proven true.

Recent U.S. spending data show that we seem to be unfazed by the discussions in Washington about the state of federal debt, Lindsey writes in The Weekly Standard.

While personal incomes have been steadily falling, so has the household savings rate, Lindsey points out.

71% Disapprove of Obama on the Economy — Gallup Poll

And 76% of Americans think it will get worse!

“The data suggest that households have responded to their troubles so far by digging deeper into savings to maintain their spending levels,” Lindsey writes.

AP941207079.jpg
Lawrence Lindsey
(Associated Press photo)
“This would actually be a good sign if household incomes were not still dropping. But an economy cannot sustain itself with ever-dropping saving rates in the face of dropping incomes.”

Declining income will in time result in a higher, not lower, savings rate and potentially a “real shock to confidence,” Lindsey contends. “It will be another reminder that confidence follows cash flow, not the other way around.”

CEOs might be ahead of consumers in terms of what’s coming next. The latest report from The Conference Board on chief executive confidence stands at 42, down sharply from 55 in the second quarter. The board notes that a result below 50 reflects a negative outlook.

“CEO confidence has declined substantially in the last two quarters and is now at its lowest level in over two years,” Conference Board Consumer Research Center Director Lynn Franco said in a statement.

“Clearly, this prolonged period of slow growth is taking a toll on confidence, and expectations are that these lackluster conditions will persist through early 2012.”

http://www.moneynews.com/Headline/L...omo_code=D444-1

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