Better, Stronger, Faster: The Myth of American Decline and the Rise of a New Economy
Daniel Gross, economics editor/columnist at Yahoo!Finance, has a new book coming out titled "Better, Stronger, Faster: The Myth of American Decline and the Rise of a New Economy," here's an excerpt that appears as the cover story in the current issue of Newseek:
"The lows of March 2009 marked the beginning of an unexpected recovery—not the beginning of an era of irreversible stagnation. The U.S. economy went from shrinking at a 6.7 percent annual rate in the first quarter of 2009 to expanding at a 3.8 percent annual rate in the fourth quarter of that year—a turnaround unprecedented in modern history. The stock market has doubled since March 2009, while corporate profits and exports have surged to records. The U.S. economy has regained its 2007 peak, and is now growing at a 3 percent annual clip—a more rapid pace than any other developed economy. The crucible of the recession forged an economic structure that is more resistant to shocks than the brittle vessel that shattered in 2008. Meanwhile, Europe continues to grapple with insoluble banking and sovereign debt crises, and developing-economy juggernauts like China and Brazil are showing signs of cracking.
It’s clear that the story of America’s recovery—unsatisfying and problematic as it has been—isn’t a Hollywood tale. Rather, it rests on an understanding of its core competencies and competitive advantages: attitudes and capabilities that, even in this age of globalization, remain unique. Contrary to the declinists’ view, global growth has not been a zero-sum game for America’s economy.
It’s easy to look at the record of the past few years and despair. The U.S. has a very long way to go to make up for lost ground in housing and, especially, in jobs. The resurgence of the corporate sector, which provides ample reason for optimism, hasn’t translated into new positions for the legions of unemployed. But here, too, there’s positive news. Since February 2010, the private sector, which accounts for 83 percent of all employment, has added nearly 4.1 million jobs, or about 160,000 per month. That’s not sufficient, but it’s a sign that the jobs machine is clearly working again. The public sector has been the sole source of job loss: austerity-minded government entities have cut a million jobs since 2010. But the sharp reductions have come to a halt.
It’s easy to look at the record of the past few years and despair. The U.S. has a very long way to go to make up for lost ground in housing and, especially, in jobs. The resurgence of the corporate sector, which provides ample reason for optimism, hasn’t translated into new positions for the legions of unemployed. But here, too, there’s positive news. Since February 2010, the private sector, which accounts for 83 percent of all employment, has added nearly 4.1 million jobs, or about 160,000 per month. That’s not sufficient, but it’s a sign that the jobs machine is clearly working again. The public sector has been the sole source of job loss: austerity-minded government entities have cut a million jobs since 2010. But the sharp reductions have come to a halt.
In the months since the Lehman debacle, the U.S. has no more lost its ability to grow and innovate than reality-TV producers have lost their ability to coax skanky behavior out of New Jersey’s youth. And despite all the headwinds, there’s no reason the expansion that started in July 2009 can’t go on as long as the previous three, which lasted 73 months, 120 months, and 92 months, respectively. When the definitive history of this period is written, it is possible—no, likely—that this post-bust era will go down not as a time of economic decline, but as one of regeneration."
17 Comments:
I found Bernanke's response to a question about Fed policy and unemployment pretty interesting:
" Question:
Unemployment is too high, and you said you expect it to remain too high for years to come. Inflation is under control, and you say that you expect it to remain under control. You say that you have additional tools available for you to use, but you’re not using them right now. Under these circumstances, it’s really hard for a lot of people to understand why you are not using those tools right now. Could you address that? And specifically, could you address whether your current views are inconsistent with the views on that subject that you held as an academic?"
Bernanke:
" In this case, we are not in deflation. We have an inflation rate that’s close to our objective.
Now, why don’t we do more? ......
I guess the — the question is, does it make sense to actively seek a higher inflation rate in order to achieve a slightly increased reduction — a slightly increased pace of reduction in the unemployment rate?
The view of the committee is that that would be very reckless. We have — we, the Federal Reserve, have spent 30 years building up credibility for low and stable inflation, which has proved extremely valuable in that we’ve been able to take strong accommodative actions in the last four, five years to support the economy without leading to an unanchoring of inflation expectations or a destabilization of inflation. To risk that asset for what I think would be quite tentative and perhaps doubtful gains on the real side would be, I think, an unwise thing to do."
of course...minds could change if we start falling back into recession.......
And ABC's nightly news is doing a series of reports this week on innovations that have created jobs in America.
We're finally seeing the "green shoots" that we were told about during the stimulus. The media will exploit it for everything it's worth to try to make Pres. Obama look successful.
The latest Dallas Fed manufacturing index is way down (http://www.zerohedge.com/news/dallas-fed-plunges-negative-biggest-miss-10-months). At best, the trend is flat (if you choose to believe in macro-economic aggregates).
One other point I alluded to before and he alludes to but bears repeating:
On the job market:
The US is adding jobs at or above pace of the previous three recoveries for the same time period in the recovery.
I like his report here.
Not too sure I agree with the length of the recovery he's thinking, simply because I don't think the situation in Europe is sustainable. If Europe should fall completely off the rails (and not just a mild recession like they are facing now, but a full scale meltdown), that could force us into a recession.
Kind of surprising to see you citing a book written by someone who is clearly a hardcore liberal who is simply doing the President's bidding.
moneyjihad:
I think I can safely assume that is not Mr. Perry's motivation for posting these stories...
"Better, Stronger, Faster: The Myth of American Decline and the Rise of a New Economy."
The new economy is worse, weaker, slower, and less efficient.
Per capita real GDP remains below the 2007 level, even after an additional $5 trillion in federal debt.
Further monetary stimulus is constrained by inflation and fiscal stimulus is constrained by budget deficits.
The U.S. economy is in a weakened position, where a significant shock will more easily cause a recession.
Most Americans understand government needs more revenues, much more in the future, from higher taxes, fees, fines, fares, tolls, etc.
Reshoring is not a manufacturing "renaissance." Instead, it makes the economy less efficient.
The U.S. already had its manufacturing renaissance, particularly from 2000 to 2007 when manufacturing employment fell 30%, as the U.S. offshored low-end manufacturing, imported those goods at lower prices and higher profits, and shifted resources into high-end manufacturing, information & biotech firms, and emerging industries.
Also, since the mid-2000s, the U.S. had to expend more resources in mining or oil extraction, which also makes the economy less efficient.
Over the past few years, the U.S. economy restructured into more regulations and a bigger government. The U.S. has been spending and squandering trillions of dollars to mostly spin its wheels.
The U.S. needs to boldly deregulate, cut spending, and cut taxes to jolt the economy out of this depression.
When the expansion is underway, we can re-regulate and raise taxes to slow the expansion and maintain sustainable growth.
Output Gap:
http://stateofworkingamerica.org/charts/output-gap-real-gdp-compared-to-potential-gdp-2000-11/
Forget about it, Peak. Deregulation isn't going to grow bureaucracy, so it's out of the question. Plus, the average American loves screwing himself with regulation and then blaming it on people who game the system.
Forget about it, Peak. Deregulation isn't going to grow bureaucracy, so it's out of the question. Plus, the average American loves screwing himself with regulation and then blaming it on people who game the system.
his claims about
"unprecedented growth" are just counter factual nonsense.
the reality is that post the 2008-9 recession, the best yoy gdp growth we put up was 3.51% in q2 2010, which is not great growth even for an expansion, much less a recovery.
the trough gdp was q2 2009 at 12641 (per bea, chained 2005 $'s). the next q was 12965, 0.42% higher. sequential growth has not exceeded 1% since the recession.
by contrast, sequential growth following the 1982 recession was above 1% for 6 consecutive quarters and above 2% in 2 of those. we saw an average of 2% sequential growth for 2 q's coming out of the 1980 recession as well, and we were heading for a double dip. year on year growth hit scorching 7-8% rates in those periods.
i am unsure whether gross is an agenda driven liar or simply innumerate, but there is absolutely no factual basis for him claims that this is an unprecedentedly strong turnaround. the truth is that it is extremely weak, not even reaching half the growth rates of previous recoveries in terms of gdp and flat out off the charts in terms of weakness of employment recovery. you have to go back to the 30's to find a jobs recovery this bad.
even the deep and sharp 1958 recession had full jobs recovery in 9 months.
gross is just flat out telling it like it ain't.
This is the same Dan Gross that three years ago wrote a Newsweek cover story hailing the end of the recession and the start of a recovery:
http://www.thedailybeast.com/newsweek/2009/07/24/the-recession-is-over.html
Of course, unemployment didn't even peak until October of that year.
He's also the author of a book arguing that bubbles are good for economies and has been justly smacked around by both the Cato Institutes (http://www.cato-at-liberty.org/a-simple-way-to-enrich-everyone-instantly/) and Greg Mankiw (http://gregmankiw.blogspot.com/2009/02/uncertainty-and-mpc.html).
Be very careful about citing this guy Mark.
Of course, unemployment didn't even peak until October of that year.
Employment is a lagging indicator. One would expect it to peak after we left a recession. I'm not saying you're wrong here, just that you're pointing to the wrong indicator.
the post ww2 recession closest to this one in terms of depth was in 1958.
comparisons between the 2 recoveries could not be more stark.
recovery began in q2 1958. sequential growth figures were 0.61, 2.34, 2.33, 2.02, 2.53. year on tear growth numbers peaked at a scorching 9.55% 5 q's after recovery began.
in the 5 q's of initial recovery this time, we saw seq growth rates of .42, .94, .97, .93, .62. peak yoy growth was 3.51% (and then dropped to 1.46% by q2 2011 before recovering a little bit.
the cumulative difference in growth over the 5 q's post recession is staggering at 10.2% in 1958 and 3.9% in 2009. that's not even 40% as much growth. that number was 7.8% in 1982, twice what we saw this time.
there is really no way to call this a strong recovery. gross is just flat out wrong.
jon-
yes and no. sure, unemployment is a lagging indicator, but pre 2000 there was not a recession post ww2 in which employment did not reach pre recession levels in 12 months once recovery began.
we are now at 3 years and only 40% payrolls recovery. it's lagging, but not that lagging.
Yahoo Finance - I stopped there...
This type of noise makes me recall something from the past. While I do not play the short side if there is a way to bet on a real decline in the markets I suggest that you make the bet.
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