Enough Wealth

Consumers Spending Less Than Justified by Actual Income

"People are spending less than normal, less than justified by their actual incomes" - you assume that what was previously considered to be "normal" was a sustainable ratio of spending to income . Over the past couple of decades consumer debt has been used to allow people ot spend more than their actual incomes, as shown by historically low (even negative) savings rates. That sort of profligate consumer spending was a boon to economic growth rates while it lasted, but was impossible to sustain indefinitely. Over-spending only continued for as long as it did due to the "wealth effect" of over-priced assets (real estate, equity markets). Now that several asset bubbles have deflated, people will be more concerned about the ratio of repayments to income. In this situation, it seems likely that spending will decline more than would be expected from looking at income levels in isolation. You can't make a convincing "all other things being equal" arguement when the world has just experienced a paradigm shift.