Although many are now having to acknowledge the worldwide impact of the sub-prime crisis, some are still singing optimistic tones that demand from China and India can buoy the world economy and keep growth humming along without solvent US consumers. But an inconvenient truth screams back at this hopeful sentiment.
Over the past year, American consumers spent close to $9.5 trillion, compared with the meagerly $1 trillion spent by Chinese consumers and the downright paltry $650 billion spent by Indians. Indisputably, US consumers have been the superstars of world consumption. They have gorged on more stuff than one could ever imagine and in doing so have accounted for a record 72% of US Gross Domestic Product. But their earnings growth has not kept pace with their habits. Consumption has been paid for by soaring debt levered off of raging asset bubbles and and enabled by
