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December 17, 2007
The consumerist mystique
It’s business spending, not consumer spending, that drives our economic cycles, says Mark Skousen in The Christian Science Monitor. True, consumer spending does make up 70 percent of our GDP, “but GDP only measures the value of final output,” leaving out a “big chunk of the economy.” If you look at “total spending in the economy at all stages,” consumer spending makes up 30 percent; business investment, 50 percent. So “if you want to know where the stock market is headed,” forget the “Keynesian principles” of the economic primacy of consumer spending. “They’re not true.” Look instead to business spending, inflation, interest rates, and productivity numbers.
Don’t let the freebies distract you
When you’re shopping for a house, beware of free gifts, says Marshall Loeb in MarketWatch. In this “home-buyer’s market,” homeowners and builders are throwing in flat-screen TVs, round-trip tickets, granite countertops and other “free” perks to entice people to buy. But “the gratis offer is little more than an excellent opportunity to start negotiating.” See if you can swap the gift for a comparably valued reduction in home price. If that doesn’t work, see if the seller will cover other home-buying expenses. And find out what the “upgrade” is worth—if you wouldn’t pay “cold, hard cash” for it on your own, “perhaps the fact it’s free doesn’t mean much to you.”
of The Week magazine.