“The first of four main components of GDP growth is consumer spending,” explains Esposito, “which is 70% of the economy here in the U.S. and has been the main driver of growth worldwide before the economy collapsed in 2008.”
New York, NY (PRWEB) June 23, 2012
In a recent Investment Contrarians article, editor Danny Esposito argues that there will be a third round of quantitative easing (QE3) because the Fed needs to have some kind of GDP growth. Esposito believes not only will there be a QE3, but also a QE4, QE5 and so on.
“The first of four main components of GDP growth is consumer spending,” explains Esposito, “which is 70% of the economy here in the U.S. and has been the main driver of growth worldwide before the economy collapsed in 2008.”
It is safe to say that consumer spending levels will not reach pre-2008 levels until debt is paid down and incomes rise, comments Esposito.
The second of the four components of GDP growth is business investment, according to the editor. There frequently have been stories in the press about how corporations are holding onto a record amount of money on their balance sheets. Without consumer spending, states Esposito, businesses cannot justify investing, because many feel the products or services they produce will go unsold.
The third of the four components of GDP growth, according to Esposito, is the net exports of goods and services. Before 2008, consumer spending led to large imports into the U.S., which led to strong GDP growth numbers.
Now that the consumer has stopped spending, Esposito points out, imports from foreign countries are falling. While exports to most nations are doing relatively well, those to Europe and Asia are slowing down due to recession. Exports are not growing fast enough.
The fourth component of GDP growth, according to the Investment Contrarians editor, is government spending. Since the crisis of 2008, the government has stepped in and printed trillions of dollars in the place of nonexistent consumer spending.
“If three of the four components that make up GDP growth are falling,” Esposito explains, “then GDP growth in the U.S. will continue to contract and bring the nation into a new recession, unless the fourth component of GDP growth—government spending—comes to the rescue.”
For this reason, QE3 will occur very soon, because, without government spending, there is no GDP growth.
To see the full article and to get a real contrarian perspective on investing and the economy, visit Investment Contrarians at http://www.investmentcontrarians.com.
Investment Contrarians is a daily financial e-letter dedicated to helping investors make money by going against the “herd mentality.”
The editors of Investment Contrarians believe the stock market and the economy have been propped up since 2009 by artificially low interest rates, never-ending government borrowing and an unprecedented expansion of our money supply. The “official” unemployment numbers do not reflect people who have given up looking for work and are thus skewed. They believe the “official” inflation numbers are also not reflective of today’s reality of rising prices.
After a 25- to 30-year down cycle in interest rates, the Investment Contrarians editor expect rapid inflation caused by huge government debt and money printing will eventually start us on a new cycle of rising interest rates.
Investment Contrarians provides unbiased research. They are independent analysts who love to research and comment on the economy and investing. The e-newsletter’s parent company, Lombardi Publishing Corporation, has been in business since 1986. Combined, their economists and analysts have over 100 years of investment experience.
Find out where the Investment Contrarians editors see the risks and opportunities for investors in 2012 at http://www.investmentcontrarians.com.
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