The U.S. economy is too reliant on consumers, according to White House economic advisor Paul Volcker. He told President Barack Obama on Monday that trimming our dependence on the consumer could come in the form of boosting exports, enhancing the national infrastructure and investing in green technology. Volcker, who used to be chairman of the Federal Reserve, believes that with consumer spending responsible for 70% of the U.S. economy, it requires “the magic of financial engineering” to keep it afloat. Simply, he said, “We cannot have so much consumption.”
If we try to rebuild the economy in its previous image, Volcker believes, “It will just break down again,” he told a global financial conference in Naples, Florida.
Consumer bankruptcies surged 41% last month relative to the year before as home values continued to fall, according to the American Bankruptcy Institute. The number of bankruptcy filings also outpaced the August level of 4% – by a factor of 10. Nearly 125,000 people filed for bankruptcy protection in September 2009, the fourth-highest since a major change in the bankruptcy law was enacted in 2005.