Via Cullen Roche there’s an article from the San Francisco Federal Reserve that’s worth taking a gander at. The graph above is just one of the very interesting illustrations of what’s happened to the U. S. economy over the last several years Here’s the observation associated with that graph:
Economic theory assumes that consumption is a key determinant of personal well-being. Many households became accustomed to the consumption trend established before the recession and expected it to continue. From that perspective, the amount of foregone consumption might be viewed as a measure of the recession’s cost for the average person. However, the pre-recession consumption trend was almost surely not sustainable because much of the household debt that helped finance that spending was collateralized by bubble-inflated housing values. Consumption was bound to slow sooner or later. Indeed, the average annual compound growth rate of real consumption per person since the recession ended in June 2009 is 1.15%, well below the 2% rate before the recession.
Moreover, it is unclear whether continuing the pre-recession consumption trend was economically desirable. Many households might have continued saving too little for retirement while becoming more burdened with debt. When the housing bubble was expanding, former Fed Chairman Paul Volcker (2005) noted several “disturbing trends,” including that “personal savings in the United States have practically disappeared,” and that “home ownership has become a vehicle for borrowing.” He called for federal policies to “forcibly increase” the saving rate as a way to address the growing imbalance between domestic spending and production.
Particularly notable is the discrepancy between nominal personal consumption expenditures and real personal consumption expenditures. People tend not to be paid in real dollars but in nominal ones and that has been very much the case during and since the Great Recession. Just look at the household income statistics.
Wasn’t the result we’re seeing one of the foreseeable consequences of quantitative easing? Assets, including many of the things you buy on a daily basis like food, have gone up in price?