As economists and stock reviewers will vouch, analysis can vary depending one's prism, or perspective -- i.e. how one views the economic world. Look at the 2008 U.S. economy one way, and you see the onset of a conventional recession. Five or so years of GDP growth, earnings growth, investment, resource / commodity / raw material utilization, and consumption have basically run their course, and a pause is due. It's a period of lower earnings, less investment, lower consumption, and we call these pauses recessions.
Look at the 2008 U.S. economy another way and you see a different picture. Five or so years of GDP growth, earnings growth, but also substantial asset price inflation - - primarily in residential real estate - - combined with only modest improvement in the U.S. trade deficit, federal budget deficit, national savings rate, and a substantial weakening of the U.S. dollar. Then, a period of slower growth ensues, a slowdown made all the more onerous by the appearance of a credit crunch that began when the real estate balloon began to deflate, if not burst.
Economist Glen Langan has pondered whether the United States' condition in 2008 is mirrors Japan's in 1986-1993. Langan argues the U.S.'s current condition differs considerably because, although each experienced asset price inflation prior to economic slowdowns, the U.S. economy is vastly more complex and flexible than Japan's of two decades ago. Further, although both the U.S. and Japan face an expanding retiree population, the U.S.'s larger population growth makes it better equipped, from a workforce carrying capacity standpoint, to pay for those higher retirement benefit/medical costs, he said.
In addition, Langan said as in the norm for the U.S. economy as it enters this stage of an economic cycle, the focus has turned to the U.S. consumer. The attention is warranted, he said, given that the U.S. consumer accounts for 58%-67% of U.S. GDP, depending on the methodology used. But whether the consumer has the capacity to continue to serve as an engine of economic growth remains an unresolved question in economists' circles, he added. Still, unresolved issue or not, differing analytical prisms or not, the U.S. consumer will have to make an appearance again, he said, for U.S. economic growth to resume.
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What's your take on the U.S. economy? From your perspective, is the U.S. economy worse than it seems? Or is the U.S. economy just in a temporary, slow-motion phase? Let us know what you think.
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Reader Comments (Page 1 of 1)
4-01-2008 @ 11:00AM
Sam said...
We're on the way down in a hurry. The government has devalued the dollar, supported the banks, lowered interest rates in a time of increasing inflation, massive consumer debt, national debt, and a government that is out of control. Food and fuel are not even covered in the governments survey of inflation. The Fed reports inflation between 2-3%. Get yourself to the grocery store and see the truth as food prices continue to soar. Seniors on retirement have a stock market that stinks, CD rates are falling because the Fed is reducing rates in order to save the economy. The government statistics for unemployment is misleading. Unemployed are only carried for a period of two years and then are dropped from the statistics. So if the government is reporting 6% unemployment, it might well be 12 to 15% or more. People have given up looking for work. Meaningful jobs (that pay decent wages) have been disappearing from America at light speed for years. No nation can survive without manufacturing. Manufacturing is wealth. Major manufacturing, for instance the Big Three auto manufacturers, are in terrible condition. It happened to steel back in the seventies and eighties. Nothing is being done to curtail illegal aliens from taking jobs, living off the Federal govenment, causing massive crime problems, not paying taxes, sending money out of the country, and leaving the U.S. taxpayer to pick up the tab. Public education is failing, particularly in major cities throughout the U.S. Graduation rates of 34 to 45%. What kind of a future are we building in the U.S. when the work force won't be able to read or write, let alone add and subtract? So, if you don't think we are in a recession now, heading toward a depression, just go on listening to those in the financial scene, including the govenment, that are soft pedaling our current situation.