Anyone who thinks the recovery in the US is sustainable and that it is actually leading to greater prosperity across all sections of society, they could do well to listen to Marc Faber. Writing for thedailyreckoning, Dr Doom opines that wealth creation in the US in recent years has been totally lopsided. Thus, while the top 1% in terms of net worth has seen most of their wealth go up by 2%, the bottom 50% are still down more than 40%!
If this is not enough, here's something even worse. The same bottom 50% have actually increased their debts meaningfully post 2007. In other words, they are more indebted than they were in 2007. And thus it is this higher indebtedness that must have caused whatever little improvement there is in the US economy and must have taken corporate profits higher. But now what? The debt levels of the bottom 50% cannot go on increasing forever. Besides, there is also a limit to which the Governments can support them. As a result, long term US economic growth much below its trend line does look like a strong possibility.
Much of what is written about the US economy often focuses on the short term scenario. Short term growth rates... Short term employment data... and so on... Many policymakers and Wall Streeters seem convinced that the current slowdown is only cyclical. And that the US economy would soon bounce back on its growth path.
But once in while some long term thinkers do pose a valid question. Can the US economy really grow the way it did in the past? Are the problems in the US economy more structural in nature? As per an article in Business Insider, several economists have significantly cut down their long term growth forecasts for the US economy.
The 2008 financial crisis marked the end of an era for the US. In the aftermath of the crisis, policymakers have been making desperate attempts to revive spending and investments in the economy through their ultra-easy monetary policies. But the economy is showing no sign of revival. We believe that the US economy is likely to remain subduedfor an extended period. And this period could actually be several years.
If this is not enough, here's something even worse. The same bottom 50% have actually increased their debts meaningfully post 2007. In other words, they are more indebted than they were in 2007. And thus it is this higher indebtedness that must have caused whatever little improvement there is in the US economy and must have taken corporate profits higher. But now what? The debt levels of the bottom 50% cannot go on increasing forever. Besides, there is also a limit to which the Governments can support them. As a result, long term US economic growth much below its trend line does look like a strong possibility.
Much of what is written about the US economy often focuses on the short term scenario. Short term growth rates... Short term employment data... and so on... Many policymakers and Wall Streeters seem convinced that the current slowdown is only cyclical. And that the US economy would soon bounce back on its growth path.
But once in while some long term thinkers do pose a valid question. Can the US economy really grow the way it did in the past? Are the problems in the US economy more structural in nature? As per an article in Business Insider, several economists have significantly cut down their long term growth forecasts for the US economy.
The 2008 financial crisis marked the end of an era for the US. In the aftermath of the crisis, policymakers have been making desperate attempts to revive spending and investments in the economy through their ultra-easy monetary policies. But the economy is showing no sign of revival. We believe that the US economy is likely to remain subduedfor an extended period. And this period could actually be several years.
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