Vice Index – Consumer Spending & Confidence Rolling Over

Jon Economy

One of the important aspects of the US economy is that recent business cycles have been longer. But also shallower.
I believe that the internet is playing a big role in this ‘lower-for-longer’ phenomenon.
Increased communication that is the essence of the internet has also meant:
a) Pricing power reduction: Consider what is happening with retail store chain closings. They are casualties of the net: with a click of a button, mobile shoppers can find the lowest prices. And shippers can deliver the goods virtually overnight (if not sooner).
b) Supplier expansion: More suppliers means more competition
c) Consumer base expansion: Connecting suppliers and buyers have expanded the overall marketplace. With more buyers, producers can achieve profits through greater volume. It’s become a virtuous cycle – if you consider deflation virtuous
Simply put, it’s damn near impossible to create scarcity. And scarcity is at the heart of inflation and economic expansion.
But here’s the gotcha: this slow economy depends on low inflation.

This post was published at FinancialSense on 08/30/2017.