If people are going to be broke or out of work, at least the cost of buying goods and services should drop, even if no one can afford them. To some degree, that is what a recession is all about. Cheap stuff can't be sold.
According to Bloomberg, "The cost of living in the U.S. probably fell in November by the most in six decades." The news service reports that consumer prices probably dropped 1.2%.
While it may appear cruel that people cannot buy things when they finally become "affordable," it may be one of the maps out of the recession. If prices keep dropping and housing and employment bottom, the consumer could start spending again. That spending could get aggressive.
The consumer has dragged the country into this recession. Consumer spending is supposed to be about 60% of the U.S. GDP.
Now, the consumer has to spend us out of the downturn. Falling prices for the things he needs, whether that is gas, clothing, or a new car, may just do the trick. Even the pinched can afford goods that have moved ludicrously low.
Douglas A. McIntyre is an editor at 247wallst.com.
Before the bell: Futures decline as oil falls sharply; GM's bankruptcy plan approved
Entrepreneur's Journal: Key steps for telesales success
The week in preview: Focus returns to earnings: Alcoa, Chevron, Family Dollar
Reader Comments (Page 1 of 1)
12-14-2008 @ 3:38PM
BHarrison said...
A basic necessity of life is "food".
Personally on my recent trips to the grocery store, I have not seen ANY of the food prices dropping . . . in FACT, they have STILL BEEN ESCALATING.
So, until the price of the necessity of food begins to drop, I can't wee where the cost of living is going down.
The cost of Utilities . . . electricity, water and sewage, etc. .. . have still been escalting also.
The "costs of living" must be inclusive of the "basic necessities" first and foremost. Gasoline has come down to approximately $1.70 a gal . . . that's a start; but everyting else has still been escalating while most people's incomes have remained stagnant or reduced slightly IF THEY HAVEN'T LOST THEIR JOBS yet.
There is a BIG DISPARITY between people's incomes now, and the costs of living as measured by the "basic necessities" . . . and the middle and lower classes are becoming more impoverished.
12-14-2008 @ 5:32PM
lego said...
Except for gas, none other prices seem to be going south in my area. Cost of renting is going up (I've seen a $50/month increase a week ago), food prices are certainly not going down. Plus, my college tuition just saw an increase of $200 a term recently. Policy makers don't really see the situation on the mainstreet due to their inflated paychecks and benefits, so they assume that the texbook definitions of deflation and recession are evident.
12-14-2008 @ 6:51PM
DWRUTSGNT said...
END THE FEDDERAL BANKING SYSTEM ARREST PAULSON AND HIS FELLOW BANKERS FOR SCAMMING THE THE AMERICAN PEOPLE WE NEED TO ENFORCE THE U.S. CONSTITUTION AND THE BILL OF RIGHTS BEFORE WE ARE IN TROUBLE A ND LOSE THIS COUNTRY TO THESE CRAZY IDIOTS