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Consumer Credit Increase a Good Sign, but the Economic Road Ahead Still Littered with Potholes

10.02.2011
“It is clearly a good sign that consumer credit has increased – it is a reflection that household debt obligations are finally returning to a more normal relationship to household income. Even so, it is not yet time to laugh that we are once more cheerily chugging along the road to happy destiny.

“On the positive side, household debt service obligations as a ratio to disposable income are in the 12 percent range, which is comparable to what we saw in the mid 1990s. The precipitous drop in household debt since two or three years ago shows that there is an end to this process.

“On the negative side, the employment picture is still not all that healthy. The unemployment rate dropped last month, but it was due more to people leaving the labor force than people getting jobs – not a great sign.

“The overall direction of economic policy is still far short of the sort of stimulus that could and would cure what ails us in relatively short order. Having maxed out on what are essentially second-best policies after having pushed them as far as they will go (yet more tax cuts and yet more monetary stimulus) the federal government seems set to cut spending (or at best keep it level), a posture that will not help the recovery at all.”

--Steven Kyle, professor of Applied Economics and Management at Cornell University

Joe Schwartz | Newswise Science News
Further information:
http://www.cornell.edu

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