Consumer Spending Confidence doing a Wily Coyote.
Will the usa consumers look down and not fall ?
If yes, then the following will have also happened.
Pigs taken flight to the clouds.
Wily Coyote caught the beep beep Roadrunner and ate it.
Sylvestor the Cat caught and ate Tweety Bird.
LOU DOBBS MONEYLINE
Aired July 16, 2001 - 18:30 ET
cnn.com
... threat to consumer confidence.
Consumers have proven to be resilient in the face
of a sudden economic slowdown. But my first guest
tonight says it would take just a small hit in confidence
to threaten the entire economy.
Alan Blinder, former Fed vice chair, joins me now from Princeton.
Now is the consumer really that important to the economy
at this point? And is the economy really that vulnerable
that the consumer could really push things over the edge?
ALAN BLINDER, ECONOMIST, PRINCETON UNIVERSITY:
I think both. Right now the economy is growing maybe
between zero and 2 percent. Some people think we might
have a negligible growth in this quarter.
Secondly, the consumer you know is two-thirds
of the economy. If consumer spending should fall
a couple of percentage points that's all it would take
to put us down into negative numbers, hopefully that's not
going to happen and there is no indication by the way
that it's happening right now.
HOPKINS:
But the consumer is really borrowing in order to keep spending,
because assets are down, wealth is down.
Can the consumer keep borrowing, given this situation?
BLINDER:
Well, that's about the $10 trillion question, no one knows the answer.
If, in fact, the consumer keeps his and her profitable ways up,
and that's been the American way for a long time,
we'll get through this OK.
If, on the other hand, he and she turns around,
looks at his and her assets statements and says,
I've lost some money in the stock market,
maybe my job is it threatened, that could be
very bad news for consumer spending.
HOPKINS:
But one of the things that's really held up is real estate...
BLINDER:
Well, so far, so good with real estate...
But it's the same sort of fear.
If the economy heads south, the real estate will take a hit.
HOPKINS:
But usually when we have a recession
it's -- the consumer that cuts back first
and then businesses respond.
This time, it's the businesses that are cutting back
and the consumer has kept going.
BLINDER:
It's definitely the businesses...
But this is a case where the business sector is clearly
in the tank, manufacturing has undoubtedly been
in a recession for sometime now. But the consumer
is spending away, and that's what is keeping the economy afloat;
and the key question is, will it continue?
HOPKINS:
Well, people point to things like...
BLINDER:
Exactly...
HOPKINS:
Your former colleague Alan Greenspan is...
BLINDER:
I don't think he'll promise anything. But...
HOPKINS:
So, your bottom line is...
BLINDER:
I think so.
But the key question is make it through winter.
You remember that old cartoon, Wily Coyote,
he used to get out on the cliff, go over the cliff,
and somehow he stayed up there.
That's kind of where the consumer is:
the wealth has evaporated,
the jobs are sagging badly,
and yet the consumer keeps spending.
And the question is, how long will they stay there?
I hope...
HOPKINS:
Thank you very much, Alan Blinder, professor at Princeton,
thank you for joining us.
BLINDER:
Good being here.
HOPKINS:
Tonight's tech watch...
... in order to make a deal.
Let's hear from you,
e-mail us at moneyline@cnn.com
And that is MONEYLINE for this Monday evening.
Thanks for joining us. I'm Jan Hopkins in for Lou Dobbs.
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