John Markman of MSN was very vocal in an interview on Tech Ticker today in which he argued that the bears are wrong about the economy because the US consumer is re-leveraging. Of course, regular readers know that I have long argued that the consumer is not ready to run with the economic recovery baton due to the continuing deleveraging that needs to take place. With a $1.5T hole in their balance sheets the US consumer is unlikely to begin borrowing money again en masse.
Markman is correct that we are seeing more signs of consumer stability and maybe even a slight pick-up in borrowing, however, I would argue that a re-leveraging of the consumer is far from a good thing and would in fact do nothing more than take us back to the same environment that got us into this mess to begin with. We need real organic economic growth, job growth, wage growth and continued consumer frugality in order to lay the foundation for a sustained long-term recovery. More of what got us here is not a good thing. Is the US consumer really re-leveraging? Let’s hope not.
Full interview follows:
Source: Yahoo Tech Ticker
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.