This economy won't turn around fast

I already blogged about the debt trap that has captured so many Americans before and through this credit crisis, but Paul Krugman's column today highlights why the mound of debt already accumulated might make this economic downturn very, very long:

According to Thursday’s G.D.P. report, real consumer spending fell at an annual rate of 3.1 percent in the third quarter...To appreciate the significance of these numbers, you need to know that American consumers almost never cut spending. Consumer demand kept rising right through the 2001 recession; the last time it fell even for a single quarter was in 1991, and there hasn’t been a decline this steep since 1980, when the economy was suffering from a severe recession combined with double-digit inflation. [emphasis mine]

So it's bad.  And those numbers are coming in before the crash in the Dow, and the seizing up of credit.  So when the economy is two-thirds consumer spending, can a Christmas holiday make us right?  Probably not.

American consumers have long been living beyond their means.

Here's the chart from the NY Times debt trap feature:

We've been spending more than we had for years, and now we're in a real bind.  Krugman goes into the macroeconomics, that the Fed can't even loosen up the economy because lowering interest rates can't help people who've been outspending their income for years. 

In other words, this recession's going to be here for a while.  Maybe we'll all learn a little thrift in the meantime.