Exporting economic growth
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Nothing much happened on Wall Street Friday. Gold鈥tocks鈥eld more or less where they were. So, we take up another week鈥ondering鈥aiting鈥rying to puzzle out what is going on.
Just like every other week!
Economists are finally beginning to ask questions. How come the economy isn鈥檛 doing better? Why aren鈥檛 consumers spending? Why aren鈥檛 businesses hiring?
They thought they were dealing with a typical recession 鈥� just one that was worse than most. But now, they鈥檙e scratching their heads. It sure doesn鈥檛 act like a typical recession. Maybe this isn鈥檛 a cyclical problem at all, they鈥檙e beginning to say to themselves. Maybe it鈥檚 structural. Maybe something will have to change. But what? How? When?
Whatever is going on, it ain鈥檛 a 鈥榬ecovery.鈥� It ain鈥檛 a depression either 鈥� at least, not yet. So far, our Great Correction hypothesis seems as good as an explanation as any.
Here鈥檚 the latest from Bloomberg:
Prospects for US economic growth took a hit this week after reports showed the trade deficit swelled and consumers reined in spending.
Consumer spending, which makes up 70 percent of the economy, is being held back by an unemployment rate close to a 26-year high. An Aug. 12 Labor Department report showing more Americans than estimated filed applications for unemployment benefits last week pointed to further weakness in the job market.
The US trade deficit widened by $7.9 billion in June, the most since record-keeping began in 1992, to $49.9 billion, a report from the Commerce Department showed. Exports posted the biggest decline since April 2009.
Investors should prepare for 鈥渕ajor structural changes鈥� as the global economy shifts to slower growth, Mohamed A. El- Erian, chief executive officer at Pacific Investment Management Co. said yesterday in a radio interview on 鈥淏loomberg Surveillance鈥� with Tom Keene.
Consumers are spending less 鈥� no surprise there. That鈥檚 just what you鈥檇 expect in a correction. The bad news is the trade deficit. It tells us that the little consumers are spending is not going to US producers. It鈥檚 going overseas.
Which means, the US continues to ruin itself so that others may have prosperity, and have it more abundantly. Jobs will be created in foreign countries 鈥� not in the US. Profits will be earned by foreign firms 鈥� or US firms doing business overseas. Capital/skills/expertise/technology 鈥� all the ingredients necessary for success in the modern economy 鈥� will continue to accumulate outside the US.
Yes, dear reader, the Great Correction continues. It will surely correct the credit bubble鈥he housing bubble鈥nd the stock market bubble. It may correct far more than that 鈥� including the dollar鈥he US bond market鈥merica鈥檚 bubble of power鈥nd outsized living standards in the US.
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