Consumer Spending…

Posted: 27 Sep 2012 in Economics, Free Market, Media, Media Bias, Politics, Truth
Tags: , ,

…doesn’t drive the economy. that’s Keynesian BS. You always hear the MSM touting the BS that the 70% of the economy is driven by the consumer. It’s actually supply that drives the demand not the other way around.
Don’t worry, it isn’t math-centric.

Enjoy the read. This is from 2010.

Consumer Spending Doesn’t Drive the Economy Investment does.
Mark Skousen

“Consumer spending makes up more than 70 percent of the economy, and it usually drives growth during economic recoveries.”

–“Consumers Give Boost to Economy,” New York Times, May 1

Every quarter, when the government releases its latest GDP figures, we hear the familiar refrain:

“What the consumer does is vital for economic growth.”

“If the consumer starts saving and stops spending, we’re in big trouble.”

“Consumer spending accounts for 70 percent of the economy.”

The latter “fact” is repeated regularly in the news reports from the Associated Press, the Wall Street Journal, and the New York Times.

The truth is that consumer spending does not account for 70 percent of economic activity and is not the mainstay of the U. S. economy. Investment is! Business spending on capital goods, new technology, entrepreneurship, and productivity are more significant than consumer spending in sustaining the economy and a higher standard of living. In the business cycle, production and investment lead the economy into and out of a recession; retail demand is the most stable component of economic activity.


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