Income vs. Expenses

The bulls are having another party, the US economy grew with a reported 5,7% on annualized basis last quarter: the strongest growth figure in the last six years! Also, the personal expenditures increased by 4% (Year on Year) in December of 2009. And all that while the incomes hardly increased.

‘America is running again.’

However, because there is a huge gap between spending and income again this probably is unsustainable. The consumption has increased because of the massive amount of government spending and the massive growth in money supply. Programs like ‘cash-4-clunckers’, loads of tax reliefs, discounts when buying new homes, and much, much more. What will happen when these measures stop? What will happen when all those incentives to spend are gone?

We can hardly speak of a sustainable growth in the US..