>And if you're really, really into apocalyptic scenarios, check out Steven
>Roach's article "US: The Great American Bubble" over at
>http://www.ms.com/gef.html (Morgan Stanley's self-styled Global Economic
>Forum). Happy bubbling!
Interesting. Roach has been saying similar things for a while, but nobody's been listening. Anyway, he makes a great deal out of revisions to the U.S. GDP accounts that show income growth from 1995-7 was actually lower than had been thought. This sheds new light on something connoisseurs have been wondering about for some time - the discrepancy between the income and product sides of the national income and product accounts. In theory, the two sides must balance - for every purchase there must be a sale, for every dollar spent (or saved) there has to be a dollar earned. In practice, they don't quite balance, because this is an imperfect world, and what sounds neat in theory doesn't work in practice. The mystery of recent years is that production had been running ahead of income, which led some to think that there was lots of income unaccounted for (e.g., new businesses start up and hire new employees who aren't immediately caught in the statisticians' radar). But it turns out that income growth was even slower than originally thought, meaning that people have been saving less/borrowing more/liquidating more savings. Roach concludes also that the stock boom has stimulated spending. This was already the most consumption-driven expansion of all post-WW II bizcycles on the old numbers - but it's even more so now. No wonder the U.S. foreign accounts are deteriorating and personal bankruptcies are at record levels. The big question is - what happens on the downside, if there is one?
Doug