Bears may ask me why I don't give you the bear case for the economy, the reason is though it's too easy. You have the way job growth has tapered off starting in April, we are currently adding nowhere near the amount of jobs per month necessary to bring the 9.1% unemployment rate down,the continually ugly mortgage situation with so many Americans underwater or facing foreclosure and prices having collapsed, along with GDP growth that has been far beneath expectations this year beginning in quarter 2.
Estimates have now come down markedly for the rest of the year and some are now suggesting while we may not go back into recession-technically over in 2009 though it surely doesn't seem this way to the millions unemployed and underemployed-we could face another 10 years of really weak growth-as David Faber suggested the other day. Then we have the S&P downgrade and the messy political situation.
Anyway I already wrote the bear case 2 days ago "Could US be iin for longer economic quagmire?"
Basically the bear case writes itself. Is there a bull case? Yes and a Newsweek article I recently mentioned a bull case was made Roger Lowenstein-of The Daily Beast. I should say that Diary of a Republican Hater's very own Shelly-aka wildthing-brought this very interesting article to my attention
http://www.thedailybeast.com/newsweek/2011/08/14/economic-recovery-is-on-the-horizon.html
Actually the case Lowenstein makes is pretty bullish indeed. He cites the economist Mark Zandi, who says the fundamentals of the U.S. economy are stronger than they have been in 15 to 20 years.
The basic narrative is "American households have pared their debt—significantly. Corporations are rolling in cash. Banks are profitable and far better capitalized"
Lowenstein urges a little patients to "deficit doves" ,of which I am something of myself
"Deficit doves will say the economy still needs stimulus. They are right that anti-recession measures such as the reduced payroll tax should be extended. If employment doesn’t pick up, I would favor a targeted jobs program, too. But a little patience is in order. The economy is sluggish because consumers have been repaying their debts. That always takes time after a financial crisis. The good news is, the typical household’s debt service, as a percentage of income, is now nearing record lows. Mortgage debt is still falling, but credit-card borrowing is ticking up"
Lowenstein does follow this up with a plea to let the Bush tax cuts expire, which as have argued in previous posts remains the worst fiscal legislation in modern American history. Indeed he argues to let them all expire not just for the wealthy-they benefit the wealthy disproportionately anyway and most Americans were in better economic shape before them. That will be tough to achieve and I'm not sure Obama or any Democrat would be willing to go out on that limb. But just economically speaking he may have a point.
This morning we of course have news of Buffett's deal with BAC
http://www.cnbc.com/id/44271446
Buffett declared that this is not 2008. At a minimum it will benefit my brother who recently bought very cheap Jan calls... I would be in it too but you gotta spend money to make money which I have none currently. An upsetting situation with the NYS Unemployment Office dithering with my check. But this important topic-the poor treatment of UI for the people who have a right to it will have to wait for another time.
Also Weds' durable goods orders were double expectations
http://www.bloomberg.com/news/2011-08-24/orders-for-durable-goods-in-u-s-increase-4-twice-as-much-as-estimated.html
This report showed durable goods for July up 4%, twice the consensus of economists-and coming on the heels of falling a revised 1.3% in June. The rise was driven by a surge in demand for autos and aircraft.
"Today’s report reflected a rebound in production at vehicle makers following supply disruptions caused by the earthquake in Japan in March. Orders for motor vehicles and parts jumped 11.5 percent, the most since January 2003."
There is still some reason for caution.
"Automakers last month rebounded from the slump caused by the Japanese earthquake, while some manufacturers like Deere & Co. (DE) continued benefit from growing sales in emerging markets. Nonetheless, regional factory surveys have shown demand plunged in August as concern over the European debt crisis mounted and stocks retreated, indicating the outlook may have since dimmed."
It’s going to take time before businesses become comfortable about investing and hiring,” said Ryan Sweet, senior economist at Moody’s Analytics Inc. in West Chester, Pennsylvania. “The improvement in July appears to be narrowly based.”
The housing picture that came out in the same report was mixed. There is still a lot of room for pessimism however even here some good news is on the horizon as the U.S. may now back mortgage refinancing for millions. As part of Obama's upcoming September jobs proposal he may sign an executive order to help mortgage borrowers.
In addition, one way we compare very favorably in the long term with both Europe and Japan is we are a country of continuing population growth and immigration. Many European countries, and certainly Japan-are homogeneous societies that don't like immigrants.
The anti immigration fervor in the U.S. recently-stemming in large part from anxiety of a future American where whites are no longer the majority-is therefore entirely counter-productive economically speaking.
Perhaps in the future economic needs will push us away from this unworthy preoccupation-fortress America. As it's our immigrants that put us at a advantage. There is some reason for hope in this regard: and example of this is where the business community and the Arizona Chamber of Commerce helped to beat back more draconian legislation.
So some reason for hope anyway. The bear case is still strong for sure and I'm not saying the bull case is correct just that it's viable.
No comments:
Post a Comment