We throw it out every day of the week, but the data we glean from it might just be good as gold.
This week I stumbled upon an article at Free Republic about the relationship between trash and economic output. It’s almost scary how well these two data points come crashing together:
America’s Consumption Economy
It’s no secret that the United States is the world’s largest consumer economy. Businesses thrive on the American way of life. We’re one of the few economies in the world where raw consumption – literally the destruction of wealth – is such a large part of daily life.
Consumption makes up 70% of the total US economy. The US economy is based on the simple fact that we buy and consume a lot of stuff.
So this economic relationship makes a lot of sense. When the economy is performing well, Americans buy stuff to replace stuff we already have. Think about the sheer number of television sets, cell phones (thrown out every two years), countertops, and a whole slew of stuff gets thrown out each day.
It’s only natural that the amount of waste Americans produce would fall during recessions. In our incredible consumption economy, rarely is anything replaced because of utility. Kitchens work the same regardless of how new the granite countertops are. Big bulky televisions show the same show, regardless of how thin the screens is. Even though I consider myself mostly frugal, I know I’ve replaced literally hundreds of things that worked just fine but were decidedly “out of date.”
I think most people are the same way. Think about your recent major purchases – I would venture to guess that most weren’t absolutely necessary. Most were probably necessary because there was something better out there, not because what you had to replace actually needed replacement.
Has the US Economy Really Peaked?
With each passing day it seems like the US economy is reaching a point of inflection – a point at which GDP growth could turn negative at any time. For what it’s worth, the Federal Reserve seems content on keeping growth numbers up with endless money printing and Congress seems happy to spend, just to add more to the government variable in the economic equation C+I+G=Y.
I think we’re in a dangerous cycle of consuming just to consume. The more that government can pour into the economy, the better the headlines look, and the better the chances are for an incumbent re-election. I’m worried we’re in the middle of a lost decade – maybe two – where the economy simply “wiggles” from recession to growth, boom and then bust.
Now it seems like we’re headed toward recession. Consumption is so very important to GDP numbers that any downturn in consumption – even a modest 3% decline – would be good enough to turn GDP growth negative. And as we know, two consecutive quarters of negative GDP growth is the traditional definition of recession.
What do you think? Is the relationship between waste and growth a reliable economic indicator?
Is the United States heading for recession?