Courtesy of Michael Panzner of Financial Armageddon
OK, score one for the bulls. Holiday sales were somewhat stronger than expected (though it will be interesting to see how much money retailers actually made on those sales given that a great many of them were discounting merchandise much earlier than normal and some were even holding post-Christmas sales before the big day arrived).
I guess I underestimated the impact of "The Stealth Stimulus of Defaulters Living for Free," as the Wall Street Journalput it in early November. In addition, I gave short shift to the fact that when "experts" who neither predicted the downturn nor its severity keep telling people the "recovery" is here, they manage to convince a few overextended but gullible consumers to loosen their wallets.
The pick-up in spending on apparel and jewelry also suggests that some Americans were in desperate need of new clothes and were likely suffering from a bit of recession fatigue. I get that, though it is not exactly a sign that all is well with the U.S. economy.
One of my bigger mistakes, however, was underestimating the extent to which government transfer payments — unemployment insurance, food stamps, social security benefits, etc. — aided consumer spending and, by extension, the overall economy. As Global Economic Intersection estimates in "Personal Transfer Payments and GDP," the accumulated value of "extra" transfer payments Americans received from 2008 to 2010 — that is, the amount over and above the long-term trend — worked out to about $569 billion.
By blogger John Lounsbury’s reckoning, that suggests the "recovery" the bulls keep harping on about — which, aside from the nasty little unemployment problem, isn’t that great to to begin with — is less than it seems.
Well, hope everyone enjoyed the good times while they lasted.
