Income Increases: The Starting Point of Our Economy

You may find the below chart interesting; while you might not get all geeked out on it like, me, you will hopefully find it interesting.

It's an amazing correlation that when we are confident, we spend. Or, is it that when we spend, we are confident?

Answer that question, and you'll be better suited to approach the next move in the economy. What comes first: Confidence or spending?

Actually, it's neither. It's the rate of growth in personal incomes. That is the beginning, or starting point of our economy. Once the rate of growth in incomes increases, people begin to feel more confident, and the rate of growth in their spending increases. If you compare the hard data on the chart below, sometimes the increases in confidence led spending. Other times it was the opposite.

Without a doubt, however, increases in incomes lead all others.

Comments

[huangjin:]

And what leads income? Production. What leads production? Savings and investment.

2007 Mar 28 12:08 PM