Skip to comments.The US Economy, Why The Bears Are Wrong...Again
Posted on 08/09/2012 3:42:12 PM PDT by blam
Why U.S. Econcomy the Bears Are Wrong Again
Economics / US Economy
Aug 09, 2012 - 02:17 PM
By: Yiannis G Mostrous
Since the beginning of the year, being bearish and trashing the global economy has been the favorite pastime for the majority of market observers. Recurring negative themes have been the sluggish US economy, the supposedly imminent demise of the euro and the slowdown in growth of Chinas gross domestic product (GDP).
Lets debunk todays Chicken Little attitudes, one by one.
The US economy is steadily (if not spectacularly) growing; the market certainly is more optimistic than the pundits. The S&P 500 index has gained around 10 percent so far in 2012 and another 3 percent to 5 percent upside for the rest of the year cant be ruled out.
To be sure, the so-called US fiscal cliff of tax hikes and budget cuts that loom on 2013 is a clear longer-term danger for the US economy. However, employment is holding up, albeit at a disappointing pace. If jobs growth is sustained, it should facilitate future income growth.
Meanwhile, from a macro perspective, the key for the future of the US economy is the countrys increasing energy independence.
Earlier in the summer, ConocoPhillips (NYSE: COP) CEO Ryan Lance said that North America could be self-sufficient in oil by 2025. If true, this development would improve the US trade balance and boost GDP growth.
Robust domestic production of natural gas is also pushing down gas prices, a big positive for consumers. Lower energy prices will allow the US economy to re-industrialize, adding another dimension to its grown potential.
Major European companies are already opening or planning to open new factories in the US, to take advantage of this energy sufficiency and lower prices.
As for Europe, my view remains that the markets are gradually pushing the leaders of the euro zone to act more decisively in resolving the Continents sovereign debt crisis. Although the EU still faces many daunting long-term problems, the crisis is easing over the short term.
Greece continues to be a basket case, but Italy is now running a trade surplus and Ireland a significant current account surplus. Spain also seems to be on the right track in fixing its economy.
Remember that the problem in Europe is not the size of the debt but rather its distribution. Some countries have more debt than others. As a whole, EUs primary budget is a quarter of US levels, the total amount of debt is below Japan and the UK, while the current account is in balance.
As for China, its true that the countrys go-go era of double-digit GDP growth is over, but its economy will continue to deliver growth of about 8 percent for the foreseeable futurea pace that most countries would envy.
Although the Middle Kingdom must grapple with many long-term challenges, investors should shun the overly pessimistic notion that not only the countrys economy but also its society is on the brink of disaster. For now, my view remains that the Chinese economy will deliver solid growth this year, especially if the infrastructure projects originally scheduled for 2012 are firmly back on track and residential property recovers in the second half.
To change the analogy: The doctors have been very skilled at keeping the patient alive and have minimized the symptoms, but the tumors are still growing.
I added the “satire” keyword. It’s either that or “Krugman”.
It looks like my thinking may be headed in the same direction. Things may not be as urgent as I once believed.
We are in a slow-motion train wreck, and our currency is in a slow-motion collapse. But it doesn't have to be.
The right answer to take from this article isn't that the bears are wrong, but that if you'll listen to the bears, and reverse course, you can turn this economy around.
The purpose of a prophet of doom isn't being right, its waking you up so that doom is averted.
North America can be energy independent. A lot of people have said that; the problem is that sectors of our government seem determined to make sure it doesn't happen. They have to be defeated.
Even an enormous debt can be grown out of if you quit adding to it, and quit asphyxiating the underlying economy. Drill, build pipelines, limit the monarchical powers of the regulators, make the "checks and balances" apply to bureaucrats too... Lower the relative cost of energy by lowering the regulatory hurdles, spend a higher percentage of our energy dollars here, quit sending half a trillion a year out of the country buying what we can produce right here, and this economy will take off like a rocket.
The stock market depends more on the headlines in the NY Slimes than it does on the actual economy.
Another “pump and dump” charlatan at work.
to understand whats been happening to the market, you need to remove the effects of dilution. to do this... you must display the market in terms of a unit of measure that cannot be diluted.
here is the GDP in ounces of gold... (I'm out and cannot put a chart together for the NYSE/NASDAQ indexes over the years in gold ounces... but you get the point)
Another liberal propaganda piece.