Too Much Consumption!

Really interesting post by Dr. Housing Bubble. He's got lots of cool graphs, and makes the point that between the mid-1950's and early 1980's, the average US household consumption rate was about 65% of GDP, and that by 2008 we were at 73%, all financed with easy credit. Since GDP = consumption + investment + government spending + (exports - imports), an 8% drop in the household consumption rate, which would merely return us to average, pre-credit-crazyness consumption rates, would result in an 11% drop in GDP, assuming the other GDP factors remain constant. Investment will likely go down, as well as exports and imports, and government spending will increase to try to cushion the blow, but that 11% drop is huge!