The Gary Null Blog

By MIKE WHITNEY

http://counterpunch.org/whitney04042011.html

According to a new report by the BEA, personal consumption expenditures (PCE) increased by $69 billion (7 percent), while personal income rose by only $38 billion (3 percent) in February.

So consumers are back to their old ways again, spending more than they earn?

Well, not exactly. The truth is, consumer spending is slowing down because food and energy are taking a bigger chunk out of the old paycheck. After factoring in inflation, personal consumption is up just 3 percent while real income fell to 1 percent. In other words, the numbers look a lot different once you factor in inflation.

The reason all this matters, is because consumption is 70 percent of GDP, so if the consumer is on the ropes and getting pummeled by stagnant wages and inflation at the same time, then you can bet the economy is headed for the dumpster. Of course, a good portion of the blame for this mess goes to Ben Bernanke whose miracle QE2 elixir has kept the stock market bubbly while commodities and food prices have skyrocketed. That's the real source of the problem, an uneven policy that rewards the investment class while leaving the workerbees (you and me) fending off soaring prices.