Those who have been tracking the almost 800 billion dollar stimulus plan since it was passed are looking for real effects from this plan on the economy.  Some would argue that these effects have come in the form of a slowing of recent rises in unemployment figures, better than expected retail sales in June and July, and the simple fact that we seem to have averted a catastrophic economic meltdown.  It’s tough to say whether or not the optimism reflected by Bernanke and Paulson is here to stay or even real at all for that matter.  There is much talk of a commodities slow-down in the fall, so it’s little wonder that there is so much nervousness in the market.  Yet a curious fact has been mostly overlooked.  All of this positive economic data has occurred during a time period when only 10%-15% of the stimulus has been spent so far.  The remaining bulk of the plan has yet to go into effect, and could help push the US economy back into a more comfortable, predictable position in 2010.

The general consensus among US consumers is that the economic recession is still in full blossom.  Not many people are truly convinced that it’s over and done, and the savings rates prove this point.  People are also paying off their debts, especially those associated with credit cards, in record numbers.  It will take quite a bit of convincing before the general population decides to come out of their financial foxholes and resume their more traditional habits.  This begs the question of whether or not the American consumer will ever spend in the same ways again, or if they have learned a lesson, at least for a generation or so, that money doesn’t grow on trees and that the US economy is not entirely impervious to weakness and massive recessions.  This is an idea, or a cultural value that has not been readily seen since the generation that lived through the Great Depression.  Most US consumers under the age of 40 have not really had to tighten their belts in their lifetime, and are realizing that there was a method to their parents’ and grandparents’ financial madness.  Saving has become sexier than spending, at least temporarily.

If the government still has around $700 billion dollars to throw at the recession, it’s likely that the effects of so much cash influx will take the economy from stagnant and deflationary, to more dynamic and inflationary.  Perhaps they are watching and waiting, hoping to avoid having to pump so much inflationary dough into the economy.  If the stimulus money is used as it has been, only a few billion per year or so, it is likely that the recession will have run its course before the majority of the money is spent.  This would help to defeat the argument that a massive inflationary cycle is on the horizon.  The idea that we have partially recovered, at least on paper, after only burning through a small percentage of the stimulus money is comforting, but it remains to be seen whether this slow and cautionary track back into neutral economic ground will last without the strong support of UG Government-backed stimulus cash flow.