I’ve been at two conferences in the past two weeks where economists or people who watch economics closely are very upbeat about prospects for the U.S. economy.
Overall, I’m not.
They’re looking at high commodity prices, relatively good demand and export markets set boiling by a cheap dollar and relatively strong demand from China in particular.
Granted, there are some good things happening, particularly in agriculture. But let’s not forget exports never make our overall economy. They only contribute or detract.
I’m re-reading economist Bill Helming’s book the last few days and he reminds me that the engine of the U.S. economy and foreign economies, including China, has always been the U.S. consumer. The problem with that engine is it’s running on about half its cylinders.
The American consumer went on an unprecedented spending binge over the last 30 years, but in particular from the late 1990s to about 2008. That consumer is now broke, his/her home and retirement accounts are worth a fraction of what they were, 15- 20% of his/her members are unemployed, he/she is trying to save more money as 78 million baby boomers near retirement, and the government is trying to get deeper and deeper into his/her pockets.
Put simply, the American consumer can’t and likely won’t spend enough to fuel the economy into a rocket-ship propulsion upward.
More likely we will creep along in a modern-day depression, as Helming says, until we work through these problems and things slowly improve.
Moreover, the Federal Reserve Board’s decision to offer unfathomable amounts of money to the economy is unlikely to work, since these monies will flow through lenders reluctant to lend to borrowers reluctant to borrow.
There will be good news and setbacks, agriculturists who manage well will make money, and the economy will recover. But it won’t be day after tomorrow.