The U.S. will not be immune to the downward pressures. In the weakening global environment, exports will drop. Consumers have increased spending by reducing their savings rate as wages continue to stagnate.

 

By Comstock Partners

EXCERPTS:

Even after a final agreement is reached the Greek government may have trouble implementing its provisions.  The nation has already made sharp cuts in government spending, jobs and wages while increasing taxes.  All of this has devastated the economy.  The November unemployment rate was 20.9% and December production dived 11.3% from a year earlier.

 

At the same time the global economy appears to be weakening.  Chinese electric production in January was down 7.5% year-to-year.  Japan has entered a recession and its trade balance has turned negative.

 

The U.S. will not be immune to the downward pressures.  In the weakening global environment, exports will drop.  Consumers have increased spending by reducing their savings rate as wages continue to stagnate.  Since the 2007 economic peak most of the increase in consumer disposable income (DPI) has come from higher transfer payments, while wages, as a percentage of DPI, has dropped off a cliff.  And unlike the period of 2003 to 2007, consumers cannot make up for the shortfall it by converting rising house prices to ready cash.

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