Saturday, September 26, 2009

The Improving Economic Picture: From 25% to 95% Odds Since March for Positive Q3 Real GDP Growth

Back in early March, as the U.S. and global stock markets were bottoming out and the general economic outlook for the U.S. was pretty uncertain, the odds of third quarter U.S. real GDP growth being positive was only about 25%, according to futures trading on Intrade. As the economic picture has gradually and significantly improved over the last six months, the odds of positive economic growth in Q3 (which ends next Wednesday) have increased to 95% (see graph above, click to enlarge).

3 Comments:

At 9/26/2009 9:01 PM, Blogger PeakTrader said...

It's difficult to be optimistic about the U.S. economy. Reagan became president at the right time, just before the 80 million Baby-Boomers (born between 1946-64) entered "prime-age" (35-54), accelerating the Information Revolution. Afterall, economies are made up of people.

The last of the Baby-Boomers will leave prime-age in 2019, and all of the Boomers will be over 65 in 2029. In a few decades, half of the U.S. population will be Third World immigrants and their offspring. They will generally have a lower skill level than the Baby-Boomers, unlike immigrants a hundred years ago, who had the same general skill level as the domestic population.

It will be expensive to raise skills of poor Third World immigrants, and they will receive other social services. Moreover, they will work harder and longer to support the retired Baby-Boom generation, not only with Social Security and healthcare, but with other goods and services.

U.S. households should have received a $700 billion tax cut to complement the $700 billion in TARP, to accelerate economic growth. Household balance sheets should have been strengthened, to spur demand of existing assets and goods rather than create new ones (e.g. concrete, shovels, and hard hats). The U.S. government has chosen to destroy excess assets, goods, and capital rather than induce households to consume them. Over the past year, there has been massive inefficiencies placed into the system. So, we can expect slower real growth for decades, since the U.S. economy peaked in 2007.

 
At 9/27/2009 7:50 PM, Anonymous Absalom said...

So peak longevity is the real threat to our economy and fiscal problems? Brilliant. You're much better with demographics than energy, PeakTrader.

In Trade. In other words, the same types of markets which failed to recognize a burgeoning economic crisis until it landed on the beach will correctly tell us when the invader has been repelled? How reassuring.

I might believe it if I didn't see more invaders climbing into the landing craft as I speak.

 
At 9/28/2009 12:05 AM, Blogger 1 said...

Improving economic picture, eh?

Maybe but...

From Richard Wilner at the New York Post: The unemployment rate for young Americans has exploded to 52.2 percent -- a post-World War II high, according to the Labor Dept. -- meaning millions of Americans are staring at the likelihood that their lifetime earning potential will be diminished and, combined with the predicted slow economic recovery, their transition into productive members of society could be put on hold for an extended period of time.

And worse, without a clear economic recovery plan aimed at creating entry-level jobs, the odds of many of these young adults -- aged 16 to 24, excluding students -- getting a job and moving out of their parents' houses are long. Young workers have been among the hardest hit during the current recession -- in which a total of 9.5 million jobs have been lost
...

From Jeremy Warner of the UK Telegraph: The dollar is dead

 

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