"Is the crisis over?"
"Is the economy recovering?"
These are questions I'm often asked. People who ask such questions are praying for a "V-shaped" recovery, hoping that the worst is over and that we're on our way to economic recovery.
Some experts say that we're in a "U-shaped" recovery, meaning the recovery will take longer, maybe another two to three years. Others fear a "W-shaped recovery," a double dip, which could result in another crash before full recovery. Some experts are calling for a zombie recovery similar to the Japanese economy's 20-year stagnation.
There's also a growing chorus of experts who are warning of our greatest fear, a depression either in the form of hyperinflation like the German Weimar Republic experienced in the 1920s, or a deflationary depression like the Great Depression.
A depression would be devastating, but could there be something worse than a depression?
The answer is, "Yes." There could be an economic collapse.
Thursday, December 9, 2010
The S&P 500 remains 21 percent below its 2007 highs. Still, many analysts foresee higher stock prices as the economy improves further.
"We expect household net worth to keep its momentum," said Gregory Daco, senior economist at IHS Global Insight. "Financial gains should offset real estate losses resulting from lower housing prices and very weak sales."
The stagnant values of homes and other real estate holdings are limiting the improvement in Americans' wealth, the Fed's report showed. The value of those holdings fell 3.7 percent last quarter. That followed a scant 0.5 percent rise in the prior three months.
The outlook for housing remains dim. Homes are most people's biggest asset. But their values are still depressed in many markets. Most economists expect home prices nationally to decline 5 percent to 10 percent by the middle of next year. In some markets, declines will likely be steeper
"We expect household net worth to keep its momentum," said Gregory Daco, senior economist at IHS Global Insight. "Financial gains should offset real estate losses resulting from lower housing prices and very weak sales."
The stagnant values of homes and other real estate holdings are limiting the improvement in Americans' wealth, the Fed's report showed. The value of those holdings fell 3.7 percent last quarter. That followed a scant 0.5 percent rise in the prior three months.
The outlook for housing remains dim. Homes are most people's biggest asset. But their values are still depressed in many markets. Most economists expect home prices nationally to decline 5 percent to 10 percent by the middle of next year. In some markets, declines will likely be steeper
Most economists think consumer spending, led by the wealthy, will rise further in the months ahead. But they still don't think most shoppers, especially low- and middle- income Americans, will spend lavishly. Shrunken home equity, scant wage gains and high unemployment will keep spending in check.
More Americans are building up savings and paring debt. That's helping repair their personal finances. But it doesn't help fuel the nation's economic growth.
Consumers saved 5.8 percent of their disposable income last quarter. That was down slightly from 6.2 percent in the April-June quarter. It's still much higher than the 1-percent-plus rates just before the financial crisis.
People are steadily trimming debt. The Fed said overall household debt dipped to $13.4 trillion in the July-September period. That's a 3.5 percent drop from a peak in early 2008.
Households, on average, are carrying around $43,321 in debt, ranging from mortgages and credit cards to auto loans and home equity lines.
Debt now accounts for 122 percent of Americans' disposable income -- down from a peak of 135 percent in late 2007
More Americans are building up savings and paring debt. That's helping repair their personal finances. But it doesn't help fuel the nation's economic growth.
Consumers saved 5.8 percent of their disposable income last quarter. That was down slightly from 6.2 percent in the April-June quarter. It's still much higher than the 1-percent-plus rates just before the financial crisis.
People are steadily trimming debt. The Fed said overall household debt dipped to $13.4 trillion in the July-September period. That's a 3.5 percent drop from a peak in early 2008.
Households, on average, are carrying around $43,321 in debt, ranging from mortgages and credit cards to auto loans and home equity lines.
Debt now accounts for 122 percent of Americans' disposable income -- down from a peak of 135 percent in late 2007
In the global race for jobs and economic prosperity, the United States is No. 2. And it is likely to remain there for some time. That's the glum conclusion of most Americans surveyed in the latest Allstate/National Journal Heartland Monitor poll. Henry Luce famously labeled the 20th century the "American Century." This survey suggests that most Americans now doubt that this new century will bear that name.
Is There a Future for 'Made in America'?
In the poll, only one in five Americans said that the U.S. economy is the world's strongest--nearly half picked China instead. Looking forward, Americans are somewhat more optimistic about regaining primacy, but still only about one in three expect the U.S. economy to be the world's strongest in 20 years. Nearly three-fifths of those surveyed said that increasing competition from lower-paid workers around the world will keep living standards for average Americans from growing as fast as they did in the past. Ruben Owen, a retired Boeing engineer in Seattle who responded to the survey, spoke for many when he said, "We're still in a reasonably good place … but it's going to get harder because other places are growing stronger."
Is There a Future for 'Made in America'?
In the poll, only one in five Americans said that the U.S. economy is the world's strongest--nearly half picked China instead. Looking forward, Americans are somewhat more optimistic about regaining primacy, but still only about one in three expect the U.S. economy to be the world's strongest in 20 years. Nearly three-fifths of those surveyed said that increasing competition from lower-paid workers around the world will keep living standards for average Americans from growing as fast as they did in the past. Ruben Owen, a retired Boeing engineer in Seattle who responded to the survey, spoke for many when he said, "We're still in a reasonably good place … but it's going to get harder because other places are growing stronger."
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