“How Long will the American Purchasing Power Last?”

2.Aug.2006 at 7:48 pm |

“How Long will the American Purchasing Power Last?”

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poor In continuation to my earlier blog eBay, Subway…or “the highway�??

Purchasing power is the ability to purchase, however an individual has a choice of how much to purchase, both in terms of expenditure and investment.

Most Americans live on credit cards with less than 1 percent savings. American consumers have been for years on a buying spree of products, mostly imported from overseas. Americans have gotten into debt for their dream homes, plasma TVs and even backyard barbeques. With imports closing in at 70 percent, the trade deficit has increased along with rising interest rates giving clarion calls of inflation and future financial instability.

The west is a victim of its own ideology of globalization resulting in free trade, job cuts, loss of leverage for employees to demand career growth, linked to an evergrowing threat of outsourcing project to companies overseas and a declining manufacturing sector.

This may lead to global market equilibrium, but the economic activity and growth is already showing signs of slowdown. U.S. Treasury Secretary Henry Paulson says the U.S. economy remains strong but in transition to a slower and more sustainable pace of expansion after growing for several years at a rate too swift to continue. Growth of the U.S. economy, the world’s largest, slowed to an annual pace of 2.5 percent in the second quarter, less than half the 5.6 percent rate of the previous three months, lower than the anticipated growth of 3.5 percent and less than the 3.2 percent growth rate of 2005.

The purchasing power of Americans will be reduced to the bare essentials, just like in many developing countries within a few decades if corrective measures are not taken soon. American economic depends on self-sustainability, kicking the addiction of cheap labor and imports and excessive consumerism.