How Will We Obtain Strong Economic Growth Going Forward?
The problem with assuming that the US economy will rebound strongly is that you first have to figure out a definitive answer to this question:
Where will the growth come from?
In the late '30s and early '40s, strong economic growth returned to the United States as a result of the onset of World War II.
After 9/11 (and the recession that followed), the economy turned sharply higher as a result of all of the "cheap" money that was available (and the orgy of buying and spending that followed).
If the economy does in fact turn sharply higher over the next few years, then what will be the driving force of this upturn?
What will we be able to point to in 10-20 years as the primary engine of growth for the United States economy?
I'm a pretty optimistic person, however I struggle to see how anyone could be overly rosy about our economic prospects going forward.
I would love nothing more than for the economy to regain its solid footing. I would love nothing more than for robust growth to return to the United States.
I just don't see it over the short-term.
A V-shaped recession? Too late for that.
A U-shaped recession? Maybe.
A W-shaped recession or a L-shaped depression? Looking more and more likely with each passing day.
Here are some of the things that cause me to lose sleep at night when I start pondering the future direction of the US economy. It's these things that cause me to question some of the more rosy forecasts for the US economy that I have been reading and hearing as of late:
1. The spending habits of the American consumer have been dramatically altered. Counting on American consumers to suddenly open up their wallets or purses again and spend like they did earlier in the decade? Don't. Things have changed.
Remember your parents or grandparents telling you about how hard it was during the Great Depression? How you should value a dollar and not spend to excess?
Sure, things aren't as bad now as they were back then - but things aren't exactly great right now either. The average American has changed the way that they spend their money, and things aren't likely to change anytime soon.
What I'm saying is - don't exactly count on Americans to start raining money on retailers, car dealerships, etc. as soon as the economy starts to grow again.
2. The "easy" credit is gone. You can thank extremely low interest rates and an abundance of "easy" credit for the post 9/11 economic recovery in the United States.
Even when the economy starts to grow again, credit will be much harder to obtain than it was back in the "boom" days.
Business loans. New home loans. Credit cards. Home equity loans. These will all continue to be impacted, even well after this recession is behind us.
The days of "easy" credit (and the buying that follows) will not return for a long, long time.
3. Jobs. By the time that this recession is over, the unemployment rate will likely hit 10-11%.
Which industries will lead the way in paring this number down to 5-6% over the next 5-10 years?
Manufacturing? Construction? Finance? Government?
I'm stumped just as you are. Without a dramatic reduction in unemployment numbers, the economy will never truly recover.
4. Debt. The United States is neck-deep in debt, and things are only getting worse by the day.
Will strong economic growth return to the United States? Maybe.
If so - how? How does strong economic growth take place? What will be the engine for growth this time around?
If you have an answer, then I'd love to hear from you below.
Filed under: General Knowledge