Darkhawk28
Diamond Member
Let's hear evidence on both sides.
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State of the Economy
- Thread starter Darkhawk28
- Start date
Stunt
Diamond Member
This might start a flame war as it is heavily biased how the US economy is doing.
All you can really do is look at the data and draw your own conclusions.
I really like this site for US economic data.
US economic data
Highlights:
GDP
here you see that the US gdp was growing at 7% in mid 2003 but has declined to 3% in a very short period.
It has dipped below the "new healthly growth line". I'm sure that line has to do with increase in population, number of jobs etc.
Jobs
here we see that non-farm jobs are rising, unemployment is declining...but 5.5% is much higher than 3.8% in 2001. That means that well over 5million jobs need to be created to get to that unemployment level.
Hours
Even though the jobs seem to be doing better, each worker is working less. 34.5 hours a week since 1993, but at 33 hours a week now, this will boost the job numbers a bit.
Output
Manufacturers are at 77.2% capacity. Much lower than 84% in 2000, but it is going up slowly.
Housing
Houses started is at 1800 this month, this is usually the time of year where starts go up but this year it has dropped from 2000. Overall the starts are very high historically. This is due to low interest rates.
Spending
consumer income is up and so is spending. income is rising more than spending. This shows less confidence in the consumer and are not spending a whole lot at the moment. All in all the average consumer is spending much more than they make.
Trade Balance
trade deficit of $518 billion. Whether this is a good thing or not is determined by the individual
Loans
Consumer Credit to Income is quite high, highest in a decade. A lot of americans are getting more in debt. Industry and Commerce have been taking out less and less loans for 3 years. Consumers continue to increase their credit loans.
Confidence
Confidence is higher than it was in 2002 but nowhere near 2000 levels.
Budget
Federal budget is not doing so hot. $500billion deficit. Debt levels are the highest in history.
Inflation
Inflation is at 3.3%, up from 1.9 in january 2004. Not near the worst it has been but still a very sharp increase.
Summary: The US economy is growing fine, it is definately not a bull market, but is showing its resiliance. Output levels could be higher, and more production could be done domestically, but all in all nothing is pointing to a critical fallout. The strength at the moment is being pushed by the consumer and their cheap borrowed money. The average consumer is spending far beyond their income. This additional money onthe market is driving prices higher and hence the high inflation rate. The interest rates have been low for some time now and i think that consumers are starting to become more reserved with spending as they are just going deeper into debt. The budget situation is something that needs to be addressed. Taxes, Spending cuts, whatever, this is what will make consumer confidence drop, especially with this bad news and higher rates because of it. Once confidence drops, spending will slow and this will cause a recession...I wouldn't worry about the economy right now, it isn't as good as it was in 2000, but it isn't all that bad. Again, look at the data and draw your own conclusions.
All you can really do is look at the data and draw your own conclusions.
I really like this site for US economic data.
US economic data
Highlights:
GDP
here you see that the US gdp was growing at 7% in mid 2003 but has declined to 3% in a very short period.
It has dipped below the "new healthly growth line". I'm sure that line has to do with increase in population, number of jobs etc.
Jobs
here we see that non-farm jobs are rising, unemployment is declining...but 5.5% is much higher than 3.8% in 2001. That means that well over 5million jobs need to be created to get to that unemployment level.
Hours
Even though the jobs seem to be doing better, each worker is working less. 34.5 hours a week since 1993, but at 33 hours a week now, this will boost the job numbers a bit.
Output
Manufacturers are at 77.2% capacity. Much lower than 84% in 2000, but it is going up slowly.
Housing
Houses started is at 1800 this month, this is usually the time of year where starts go up but this year it has dropped from 2000. Overall the starts are very high historically. This is due to low interest rates.
Spending
consumer income is up and so is spending. income is rising more than spending. This shows less confidence in the consumer and are not spending a whole lot at the moment. All in all the average consumer is spending much more than they make.
Trade Balance
trade deficit of $518 billion. Whether this is a good thing or not is determined by the individual
Loans
Consumer Credit to Income is quite high, highest in a decade. A lot of americans are getting more in debt. Industry and Commerce have been taking out less and less loans for 3 years. Consumers continue to increase their credit loans.
Confidence
Confidence is higher than it was in 2002 but nowhere near 2000 levels.
Budget
Federal budget is not doing so hot. $500billion deficit. Debt levels are the highest in history.
Inflation
Inflation is at 3.3%, up from 1.9 in january 2004. Not near the worst it has been but still a very sharp increase.
Summary: The US economy is growing fine, it is definately not a bull market, but is showing its resiliance. Output levels could be higher, and more production could be done domestically, but all in all nothing is pointing to a critical fallout. The strength at the moment is being pushed by the consumer and their cheap borrowed money. The average consumer is spending far beyond their income. This additional money onthe market is driving prices higher and hence the high inflation rate. The interest rates have been low for some time now and i think that consumers are starting to become more reserved with spending as they are just going deeper into debt. The budget situation is something that needs to be addressed. Taxes, Spending cuts, whatever, this is what will make consumer confidence drop, especially with this bad news and higher rates because of it. Once confidence drops, spending will slow and this will cause a recession...I wouldn't worry about the economy right now, it isn't as good as it was in 2000, but it isn't all that bad. Again, look at the data and draw your own conclusions.
sandorski
No Lifer
It was picking up nicely, but appears to be cooling down as fast as it heated up. IMO, there is way too much Debt in the US Economy, both Public and Private. The low $US has not had the intended effect(Improved Trade Balance), high Oil Prices have offset any benefit from Tax Cuts, and high Government Deficits are taking money out of the Economy affecting both Consumer Spending and Corporate Spending by Increasing Real World Interest Rates. The US Government needs to get rid of their Deficit and quit competing with the Private Sector for Capital, Capital that would be better used as Corporate/Private Spending.
Inflation is causing Interest Rates to increase as well. As they do, many Consumers are going to get crushed by their Debt Load. Within a Year or 2 expect a sharp increase in the aea of Personal Bankruptcy and Defaulting of Mortgages and other Credit spending Vehicles.
Tax Increases would be less Harmful than continued Deficit Spending.
Inflation is causing Interest Rates to increase as well. As they do, many Consumers are going to get crushed by their Debt Load. Within a Year or 2 expect a sharp increase in the aea of Personal Bankruptcy and Defaulting of Mortgages and other Credit spending Vehicles.
Tax Increases would be less Harmful than continued Deficit Spending.
Tripleshot
Elite Member
I believe every year an election takes place, the market shutters and fluctuates nervously, andafter the election isdecided, the market stabalizes and we adjust accordingly. The market is being hit severely with this election because the race is so close and the country so devided, fiscal managers can't figure which way to swing to suck up to the new political climate. After Nov 2, this will not bea problem. I'm calling my fund manager in the morning and pulling out of the market until this blows over. The fluctuations are killing my portfolio, which is high risk.
Another reason the stock market keeled over last week is the insane rise in oil prices, and nervousness over that dolt Greenspan making another speach this week.
Another reason the stock market keeled over last week is the insane rise in oil prices, and nervousness over that dolt Greenspan making another speach this week.
dmcowen674
No Lifer
This can't be, you hear HS and the rest of those P&Nr's that the Stock Market, Economy, Jobs and Wages are the highest ever, what the heck are you talking about???
Dissipate
Diamond Member
Your Money or Your Life by Sheldon Richman
BTW, I wouldn't care if the government racked up debt after it repealed taxes. Once taxes were repealed I would actually love it if the government racked up huge debt. That way it would go bankrupt and would be forced to sell off its land & assets to private investors.
That is actually what is happening here in San Diego, the city had to put up $500 million in land as insurance against default on debt. I'm hoping the city goes bankrupt so it has to sell off that land to private investors.
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