US GDP is 70% consumer spending. That means that wages have to increase beyond the rate of inflation OR THE ECONOMY CAN’T GROW.

Soup Kitchen U.S.A. | By Mike Whitney

09/11/07 "ICH" -- -- The days of the dollar as the world’s “reserve currency” may be drawing to a close. In August, foreign central banks and governments dumped a whopping 3.8% of their holdings of US debt. Rising unemployment and the ongoing housing slump have triggered fears of a recession sending wary foreign investors running for the exits. China, Japan and Taiwan have been leading the sell off which has caused the steepest decline since 1992.
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After all, the Fed’s loose monetary policies added to Bush’s extravagant spending---$3 trillion added to the National Debt in just 6 years--- doomed the country from the beginning. Deficit spending has been the central organizing principle from day 1. Now comes the hangover. ...
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Consider this: US GDP is 70% consumer spending. That means that wages have to increase beyond the rate of inflation OR THE ECONOMY CAN’T GROW. It’s just that simple. So how is it that 50% of the American people still believe Bush’s supply side baloney that cutting taxes for the uber-rich strengthens the economy? How does that increase wages or build a healthy middle class. If we want a strong economy wages have to keep pace with productivity so that workers can buy the goods they produce.
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That’s it. No growth---just a galaxy of debt-instruments with odd-sounding names (CDOs, MBSs, CDSs, etc) stacked precariously on top of each other. That’s what we call "wealth" in America.

It’s all smoke and mirrors. The financial system has decoupled from the productive elements of the economy and is now beginning to show disturbing signs of instability. ...