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A status report on the US economy. What lies ahead for us?

3 February 2013

Summary: Today we again look at the US economy. What’s happening? What does it tell us about the future?

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Recent US economic data is confused far more than usual.  For several months we have seen contradictory economic statistics (more so than usual).  The economic signals different drastically in magnitude, and often directionally as well.

The global picture is just as confused.

About the future

Most economists make the smart bet, predicting that both the US and world economy will continue to grow slowly (ie, things in motion continue in motion).

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A photo of the US economy

A photo of the US economy

What about the contrary signs? Rather than fit them into a coherent picture, most economists wave them away. That’s usually the correct choice, but also why the consensus of economists has never predicted a recession in advance, and often not even after it has started.

While successfully predicting the business cycle was never easy, it has become more difficult.  Future historians will draw a line sometime in the annals of the 1990s  and say “here ended the post-WWII era”.  So many of the assumptions economists’ models rely upon — the patterns, averages, correlations, etc — have changed. The coming political and economic structures will render existing models into useless curiosities.

For details about this process see:

The driver of our recovery

While the future remains uncertain, two things about the past are clear. First, the steady growth of the economy since Spring 2009 — despite the warnings of so many conservatives (who consider Keynesian economics obviously wrong, despite its demonstrated predictive power). Second, the cost of the recovery: $6.4 trillion in new Federal public debt since the recession began in December 2007. That’s a 225% increase, $1.2 trillion per year.

What’s the effect of so many years of fiscal and monetary stimulus? That’s the subject of the next post.

For More Information

Posts about the US business cycle:

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