A newly Resilient economy is poised to expand this year at its fastest pace since 2003, thanks in part to brisk spending by consumers and businesses.Spending that would otherwise not take place if the true condition of the economy were widely known. But as we will see, much of this spending is based on much of the same cheap credit that fueled the previous decades boom and subsequent bust.
The 51 economists polled.... expect gross domestic product will be 3.5% higher in the fourth quarter of 2011 than a year earlier... that would be the largest increase since 2003.Those economists must not be paying attention to Washington lately. Much of GDP growth reported in the previous year was a result from the increase of Government spending. Once the Government is unable to carry any more debt and the new Republican congress refuses to tolerate it, GDP will plummet. This is not a bad thing, but it will strip away the comforting illusions that serve as the basis for most of the optimistic forecasts.
To be sure, the economy faces substantial challenges, including high foreclosure rates, rising commodity prices, strained state and local governments as well as the risk that financial tremors in europe and geopolitical ones in Egypt could cut into growth.Realistic rendition of the above text: the economy faces huge challenges; there is too much debt, private and public, that has to be liquidated.
Since late last summer, the economy appears to have strengthened considerably. The economists put the risk of a return to recession at 12%, down from 22% in September.How so? The fact that people have forgot about Europe? That their doubts about the economy are silenced by the skewed and deeply fraudulent GDP and unemployment numbers? The BLS notwithstanding, the economy is very much struggling, and only a FED Cheerleader trying to feed our collective "animal spirits" can seriously have good prospects for this year's economy.
Meanwhile, nine of 10 say the turmoil in Egypt hasn't substantially altered their outlook.Here is a perfect example of academics concentrating too much on the micro fact without considering the broader trends behind it. What the turmoil in Egypt indicates is a wave of societal unrest. Academic social science notwithstanding, there really are waves of human emotion that flow inexorably. The specifics of the waves may be beyond even the the finest of human minds, but there is an engine that drives history and events, waves in which Egypt is merely a harbinger to.
The economists over at the journal are mislead because they have forgot that superficial growth can sow the seeds of an ensuing crises. Four years ago, the economy was booming by every standard. But what did it beget? And what makes you believe that the apparent recovery is not composed of the same substance as the previous boom? Interest rates are at record lows, foreclosures are being stalled, debt is accumulating, the gap in our manufacturing capacity is overshadowed by the fact that we get our goods for free (at least for now), the bond market is bubbling, heck, even student loans are bubbling.
Whether it will collapse this year or not is uncertain, but it will happen within the next few years. Here's the test in which we see who is right. The economic authorities read by millions, or your humble messenger of this little internet outpost.