Wikinvest Wire

Seven more things to worry about

Monday, January 25, 2010

Dan Froomkin at The Huffington Post comments on a series of articles by John Hanrahan that appeared at the Nieman Watchdog website in which some of the better economists in the world were interviewed, sharing their thoughts about our collective future.

[Note: The phrase "some of the better economists in the world" as used above was intended to identify those dismal scientists with good forecasting track records rather than those who are successful at either helping big Wall Street firms make truckloads of money or perpetuating the status quo in both academia and at the Federal Reserve.]

A common theme underlying them all is that while our leaders -- and the voices of conventional wisdom -- treat our current recession as cyclical in nature, and are essentially mostly just waiting around for growth to pick up again, there is plenty of reason to believe that this crisis was instead an expression of structural problems. And if that is so, and we don't take the proper action, then the wait could be a long one.

No. 1: The middle class may never be the same again
No. 2: The recovery could take a really long time
No. 3: The recovery could only be temporary
No. 4: Then what? This time, we don't have the tools to get out of a recession
No. 5: The ‘very serious' people in Washington are still obsessed with the deficit
No. 6: Whatever is making the stock market go up could go away
No. 7: The hugely irresponsible financial sector remains unchastened
The details are even more depressing than the bullet points listed above - such things as Americans no longer being able to live beyond their means, fading asset-based wealth due to burst asset bubbles, rather dim prospects over the longer term for an economic recovery, and related issues.

If you're looking to start out your week on a sobering note, this is a good place to begin.

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Anonymous said...

The market went up today! Whooohooo! Huffington and puffington and still can't blow the house down!

Of course, the house is under water which makes blowing it down redundant. But you know the old saying, right?

"Give a man a fish and he'll eat for a day. Put the entire economy under water and the man will sleep wit da fishes for ever."

Ya gotta say that last part like you grew up in Brooklyn.


Anonymous said...

It was that accursed central bank that destroyed the middle class. They confiscated the entire productivity gain for the last few decades, and then loaned it to spendthrifts. Now the bank is trying to destroy the Baby Boom's retirement by confiscating their meager pensions/savings.

Anonymous said...

The S&P 500 peaked in early 2000 at around 1500 points. If the S&P 500 returns 6% annually for the next decade, then its level will be around 1970 points in early 2020. Hence, the market would have increased about 1.5% annually from 2000 to 2020 by just accounting for points level increase. The points level (i.e., 1500 in early 2000) is the price return and not the total return (which accounts for dividend). So assuming a typical 2% dividend, that means it would increase 3.5% annually from 2000 to 2020. Annual inflation typically is 3.5% during non-recession years.

Thoughtful readers, what are you thoughts on this?

Anonymous said...

Re: annual inflation

How do you propose to measure that? Hedonically-adjusted CPI? Actually, in aggregate, in an economy that is becoming more productive, the natural state is deflation. Housing, food and basic needs should cost less as productivity increases. You spend less time on this and have more time for other work or leisure. The fact that this is not happening is evidence that either we are not becoming more efficient at providing basic food and shelter or that our productivity is being siphoned off to support other activities.

Measure the inflation rate as an increase in the money supply (this is the cause) and not as an increase in some general price level (the effect).

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