The Economist offers an interesting commentary on the GDP boom: “While America’s corporations have been strengthening their balance sheets, the same cannot be said for households. According to Thursday’s figures, consumer spending rose at an annual rate of 6.6% in the last quarter. Pre-tax incomes, however, grew by much less. Part of the difference was filled by borrowing, which was growing at an annualised rate of over 5% in the summer months. Borrowing at such a rate seems unsustainable but, for the moment, households seem happy to add to their debts because they are easier than ever to service. Interest rates recall the fifties not the nineties. On Tuesday, the Federal Reserve voted to keep its target interest rate at its lowest level since 1958 for a ‘considerable period’. Rates on mortgages, personal loans and car loans are at the lowest that most borrowers can remember.... Borrowing from the future is made even easier when the government does it for you. The federal government ran an unprecedented deficit of $374 billion in the fiscal year just ended—and this record is unlikely to stand for long.”
Optimism might also be tempered by the money supply data offered by Frank Shostak: 8% increases through the summer months can create an impressive boomlet.
