This week's letter is from Paul Kasriel of The Northern Trust Company. Kasriel is Senior Vice President and Director of Economic Research, responsible for producing the Corporation's economic and interest rate forecasts.
The US consumer has kept the economy strong, but can they maintain the current trend? Kasriel has assembled a long list of economic numbers and asks the readers to look at the data and make their own determination on our economic future. He lays out a straight-forward case that on average the US consumer is spending more than they are making, a situation that cannot last for too long.
John Mauldin, Editor
Outside the Box
2005 Flow-of-Funds Data—I Report, You Decide
Households' cash outlays for goods, services and nonfinancial assets (e.g. houses, SUVs) were approximately $662 billion more than their cash inflows in 2005 - a record in dollar terms and a record 7.3% of disposable income. The history of the dollar value of cash-inflow minus cash-outflow is shown in Chart 1 as "net financial investment," which is defined as households' net acquisition…