We all know the Federal Reserve increased the money supply by trillions of dollars in its effort to boost consumer spending after the credit crisis hit in 2008. Sadly, I feel like the entire stimulus was given to Wall Street on a silver platter, leaving the average American Joe to suffer. Can you believe that, five years after the credit crisis hit, consumer confidence still hasn’t returned to where it was during the crisis? The Conference Board just reported an up-tick in its Consumer Confidence Index. The Consumer Confidence Index rose to 73.7 in November from 73.1 in October. It was 76.4 in February of 2008—during the crisis. (Source: Conference Board, November 27, 2012.) The index is based on a survey about how optimistic and pessimistic consumers are about current and future economic conditions. Trillions of dollars thrown at the economy, and we can’t get consumer confidence going? To reiterate, consumer spending goes up when consumer confidence increases. In the United States, consumer spending makes up 70% of the gross domestic product (GDP). Why is it so difficult to get consumer confidence and ensuing consumer spending to rise? Unfortunately, there are underlying issues that will continue to be obstacles to rising consumer spending. According to the survey conducted by the Conference Board, 31.5% of respondents still believe business conditions are bad. 38.8% continue to hold on to the view that jobs are difficult to get in the U.S. economy. The bottom line is that consumer spending can only increase if consumers have money to spend. But real personal disposable income in America has been decreasing. It fell again in October, this time by 0.1%. (Source: Bureau of Economic Analysis, November 30, 2012.) Since July, real disposable income has fallen about 0.4%. (Source: Federal Reserve Bank of St. Louis, November 30, 2012.) And the savings rate is collapsing again. Since July, the personal savings rate for Americans has decreased almost 13.0%. Years ago, when the financial crisis hit, I wrote that, historically, it has been consumer spending that has taken us out of recessions. I said this time that, because Americans were hit so hard by the bust, it would take years for consumer spending to come back. That opinion has changed. But with so much negativity amongst consumers—with 1) their real personal disposable incomes declining; 2) their savings deteriorating; 3) corporate earnings growth deteriorating; and 4) rapid inflation knocking at the door—my concern moves from worrying about when consumer spending will come back to when the next recession will start. It looks like 2013 will be a very challenging year for the American economy. Michael’s Personal Notes: Nowadays, the fiscal cliff is the topic of discussion ... Read More