Pimco’s Bill Gross wrote an article in the Washington Post today that has some good, well-said points. He wants increased demand. This is what is lacking, according to Gross.
If you want a consumer economy, then you have to establish capital formation at the most personal level. That means a steady, viable, and sustained saving rate. But, at the height of the consumer bubble, we had a basically zero saving rate. Even tipping into a negative rate at times. The American people(consumers) were running wide open.
In retrospect, the fiscal and monetary polices, were effectively anti-consumer. This was vividly revealed in the lackadaisical attitude toward debt. The jubilant VIce President Cheney declared, “debt don’t matter anymore”. Wall St., the bankers, financiers, etc. developed such an insatiable taste for more revenue. It is like they had blinders on. And, if you leverage a lot, you have to patiently deleverage a lot.
Demand very well may have receded, but it had powerful motivators. Gross mentions some of those, such as demographics and globalization.
Why not let demand naturally heal ? Why not set long term goals ? Why not support a moderating lifestyle ? A little breathing room.
If debt is a symptom, as Gross says, it has bigger implications than just economic policy.