Consumption: Not Just a U.S. Phenomenon

It is certainly encouraging to see equities (be able to) rally, especially after some recently deflating market action. But regardless, the (historic) new trend in the bond market should greatly concern any investor.

As a trend, the flattening of longer-termed (Treasury) borrowing yields could be interpreted as creditor-capitulation. These terms on long term financing should bode well for a nation of great debt. After all, time can be of the essence (for a great nation of debt) during periods of debilitating credit conditions, as well as severe and punishing capital and economic contractions.

Policymakers will have their hands full trying to formulate plans for economic growth and recovery. The (many) goals: Improvements within areas of economic production and consumption. Looking at the action within the U.S. bond markets, one might be led to believe that global recipients of our obligations are settling for lower financing terms in order to support their (and our own) economic growth. And light of a global economic slow-down, these (creditor) entities might be settling for a very familiar form of economic growth: One that was (and is) primarily based on U.S. consumption. But the question remains as to whether creditor nations will continue to pursue policies that encourage foreign dependent economic growth.

Trends within currency markets reflect the strength of our greenback, and with that, the value of U.S. denominated reserves. Can these trends be a reflection of higher (global) expectations of a rejuvenating U.S. consumer? Well, for once, a stronger U.S. dollar should do no damage to a growing (and producing) creditor nation. Especially, to one whose economic growth is dependent on a U.S. consumer. But underlying (and dynamic) currents within global economies can easily shift in the absence of a much-needed U.S. consumer. And with that can come a realization: economic consumption is not just a U.S. phenomenon.