FOR THOSE OF YOU WHO HAVE YOUNG ONES IN THE HOUSE WHO ARE “SWIFTIES”, HERE’S A WAY TO TEACH THEM A BIT OF ECONOMICS….
The Commerce Department has reported a white hot 4.9% third quarter GDP growth. So why are Americans so bearish on the economy?
Part of the problem is indeed an over-reliance on a Taylor Swift economy. We’ve reached a peculiar Bidenomics inflection point where a pop star’s concerts and related bling sales can have more stimulative effects than a bevy of factory workers.
Here, when you deconstruct the 4.9% GDP growth number, you will see consumer spending accounted for a full 2.7%. At the vanguard of this consumer spending growth catalyst has been Ms. Swift, whose concert performances are boosting tourism from Philly and Chicago to Cincinnati, Colorado, and Las Vegas.
Don’t believe me? Then believe the Federal Reserve’s Philly branch where some closet Swiftie no doubt talked his or her boss into doing an economic study of the Swift economy.
Now here’s our reality check: This type of consumer driven Swiftie hyper-growth likely can’t last because fueling consumer spending has been an orgy of government assistance to individuals and corporations alike to help them through the ravages of the pandemic.
The inability of consumers to initially spend during the pandemic coupled with massive government handouts allowed consumers to dramatically boost their savings rates and accumulate a nice little nice egg. Now, in a classic case of unleashed pent-up demand, America consumers have been splurging on travel, restaurants, and all manner of luxuries, including Taylor Swift concerts which command an average ticket price of $1,300.
As the adage goes, however, this, too, shall pass. Savings rates are now plummeting as nest eggs are being scrambled into Swiftie bling omelets — the savings rate swooned from 5.2% in the second quarter to 3.8% in the third quarter alone.
Meanwhile, credit card debt is at its highest since 2005. With the average interest rate on that debt now a whopping 23%, more and more consumer dollars will be spent financing that debt than using credit cards to buy new Swiftie tickets.