The global economic downturn, declining exports, and low domestic consumption and fixed asset accumulation, dampened by government austerity measures, resulted in an economic contraction of 6.8% in 2009.
People like Steve Roach were worried about an economy based on asset bubbles leading to consumption bubbles that were unsustainable.
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Layoffs would slow and consumption resume if the Fed sped its asset purchases and Washington stopped imposing arbitrarily low prices on equity holders and regulatory capital in the blind assumption that crisis markets are accurately priced.
By contrast, more stimulus simply magnifies the imbalances, including excessive government spending, too much consumption, inadequate production, and artificially elevated asset prices.
In Crash Proof , I talked about how our economy suffered from the co-morbid diseases of asset bubbles, excessive debt and consumption, and insufficient savings, capital investment, and production.
The data did show a return to personal consumption in China and a softening of fixed asset investment at least in the near term across the manufacturing, infrastructure and property sectors.
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This asset forms my savings, my deferred consumption.
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Some, including Bernanke himself, argue that rising asset values drive up confidence that bleeds into the very consumption that the Keynesians at the Fed presume to be the source of economic growth.
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They have also assumed that rising asset prices will drive powerful "wealth effects, " encouraging households to boost their consumption.
Mr. HEIRT NOELT (Belgian Asset Manager): Exports have been the main engine of growth in Europe, where as consumption and credit growth have been the main engine of economic growth in the United States.
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