Posted on 10/10/2008 7:21:03 PM PDT by JimBianchi11
Talking Ourselves Into A Depression
By INVESTOR'S BUSINESS DAILY | Posted Friday, October 10, 2008 4:20 PM PT
Economy: Feeling a bit, well, depressed? It's not surprising. Headlines around the world are filled with the D word, as if an epic global economic collapse were inevitable — especially here in the U.S. It isn't.
No, we're not hopelessly out of touch. As our coverage shows, we know how serious the current financial mess is — and how important it is to the U.S. and the rest of the world that we begin to settle down our markets.
(Excerpt) Read more at ibdeditorials.com ...
A new economic forecast of 52 leading economists shows most expect the U.S. economy to shrink in the third and fourth quarters, plus the first quarter of 2009 — the first time in nearly half a century that the economy will undergo three quarters of contraction.
In short, we might be in for a brief, yet brutal, recession.
But talk of a depression and other apocalyptic possibilities are way overdone. One investment house last week called this the "death throes of the old economic order." The Washington Post, in a front-page article, asked plaintively if this episode marks "The End Of American Capitalism?"
Just two weeks ago, German Finance Minister Peer Steinbrueck told Britain's Daily Telegraph today's crisis was an "American problem" that would end the U.S.' "superpower status."
Sorry, but such Euro-gloating aside, this crisis won't last. We won't even be close to a depression. And when it ends, fundamentals will reassert themselves — namely, population and productivity growth, the two engines to long-term economic success.
This is the U.S.' edge — and it's not going away soon. Since 1980, real per capita GDP has expanded 69.2% in the U.S. vs. 65.6% for the EU 15. Why? Our productivity is greater. In just the last 10 years, U.S. productivity has expanded 2.5% a year, with Europe growing nearly a full percentage point less.
This will widen. "Historically speaking . . . America's economic hegemony has never been greater," wrote Gerard Baker in London's Times a few months back. He's right. Financial crisis notwithstanding, the U.S. economy will be twice Europe's size by 2025.
Even after our stock market and housing losses, the U.S. is still extraordinarily wealthy. In the second quarter, Fed data show, the U.S. private sector owned $110.6 trillion in assets — an immense amount of wealth. The estimated $1 trillion to $2 trillion cost of the current financial mess is small by comparison.
During the Great Depression, U.S. output plunged 27% in four years; unemployment neared a third of the work force. Real private investment shrank 87% in three years; personal spending plunged 41%. We're not close to that. Nor are we likely to be — unless we foolishly pursue high-tax policies that would kill growth.
It's easy to give in to excessive pessimism these days. But the U.S. model — based on productive labor, free trade, fewer rules, lower taxes and rewards for entrepreneurial effort — is still sound. We'll soon emerge stronger, and better, for our current tribulations.
Chin up. We just gotta spend more money.
The libs in this country have been talking down this economy for the last two years! Funny .. just happens to coincide with this election cycle.
Funny how a year ago with oil prices near $150.00 a barrel, all the media could talk about was the impact on “main street” even though the stock market was hitting record highs. Now with oil almost half that, you would never know. Now it’s all stories about how the Wall Street mess will effect main street.
Yep. It should be noted that for most of us, the price of gas is a significant factor in our day-to-day life, while the stock market is a secondary indicator of life on main street. That they aren't talking about the drop in oil prices is indicative that they are focused on bad news. Especially if it helps their favorite candidate.
The WP, NYT and other liberal rags would love the end of capitalism because, in a socialist society where they wouldn't have to compete, they might then actually be able to get government funding to keep themselves afloat. These "national treasures" must not be allowed to die, and all that.
We all need to keep working at whatever we can find to do. Be frugal, but don’t hoard all of your cash at home (lest burglars catch on to that risky practice). Take advantage of lower prices for what you need, because deflation is already occurring in some places and on some items. And save a little in your local deposit banks to help keep local projects going.
Read in AM
“Chin up. We just gotta spend more money.”
Uh, no, we just gotta work longer hours.
We just gotta change child-labor laws so that our children can get a head-start on paying for the socialistic tendencies of their fathers.
Went out to eat after work...the restaurant was full.
Drove by Wal-Mart...parking lot was full.
Went to Lowe’s...people everywhere.
Don’t these fools know it’s the end of the world and only Obamessiah’s Sociofacism (just made that up) can save them?
Same here in San Francisco Bay Area, restaurants and stores full of people spending money. Was at Lowe’s and Home Depot today, lots of buying going on. I don’t get it. Unless they all figure Obama is going to lose so not to worry, or that he’s going to win so why not go on a spending binge while they can.
When people stop spending, factories, businesses, restaurants, retailers, etc., etc., start laying off people, some of the businesses profits shrink, some start losing money, their stock drops, some of them even go out of business. The consumer is responsible for 2/3 of the economy, the government for 1/3.
It's easy to give in to excessive pessimism these days. But the U.S. model — based on productive labor, free trade, fewer rules, lower taxes and rewards for entrepreneurial effort — is still sound. We'll soon emerge stronger, and better, for our current tribulations.That sounds pretty optimistic. But I wonder how the author might change the wording should nObama make POTUS?
bttt
More spending and more uneducated labor immigrating and we can make those stockbrokers rich again! WOO-HOO!
Spending helps only if we have the money to spend. Spending on credit or effectively credit, via devaluation, doesn’t actually help.
Yeah I was being sarcastic.
Our current model of consumer spending to fuel our economy has created many pitfalls.
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