Flexibility, innovation and risk
People are not automatons. They can innovate and generate surprises by their behaviour. This is what U.S. consumers and producers did in the fourth quarter of last year. Forecasters’ original expectation of negative growth has been roundly contradicted by the hefty upward revision to the GDP growth estimate. Yes, 0% car financing helped a lot to get the rosy results, but it also required optimistic consumers determined to prove that recessions are un-American. Burned by disappointing stock market performance over the past year, they have found some solace in low financing costs and home equity. Never mind that this has resulted in a further increase in an already heavy debt load. Uncle Greenspan has taken care to make its financing as cheap as possible.
