As some predict that the GFC is a thing of the past, more sober heads are suggesting to be cautious about whether things really are improving in reality. Yes, the sharemarket seems to be exhibiting positive signs, but does that mean that we are over the worst?
Paul Krugman, Nobel Prize winner and op-ed writer for The NY Times draws parallels to the situation the US found itself in 1937. Positive blips around but the realities suggsting otherwise. He cautions against a false draw!
He writes in his column "That 1937 Feeling":
"Which brings us to the still grim fundamentals of the economic situation.
During the good years of the last decade, such as they were, growth was driven by a housing boom and a consumer spending surge. Neither is coming back. There can’t be a new housing boom while the nation is still strewn with vacant houses and apartments left behind by the previous boom, and consumers — who are $11 trillion poorer than they were before the housing bust — are in no position to return to the buy-now-save-never habits of yore.
What’s left? A boom in business investment would be really helpful right now. But it’s hard to see where such a boom would come from: industry is awash in excess capacity, and commercial rents are plunging in the face of a huge oversupply of office space.
Can exports come to the rescue? For a while, a falling U.S. trade deficit helped cushion the economic slump. But the deficit is widening again, in part because China and other surplus countries are refusing to let their currencies adjust.
So the odds are that any good economic news you hear in the near future will be a blip, not an indication that we’re on our way to sustained recovery. But will policy makers misinterpret the news and repeat the mistakes of 1937? Actually, they already are."
Paul Krugman, Nobel Prize winner and op-ed writer for The NY Times draws parallels to the situation the US found itself in 1937. Positive blips around but the realities suggsting otherwise. He cautions against a false draw!
He writes in his column "That 1937 Feeling":
"Which brings us to the still grim fundamentals of the economic situation.
During the good years of the last decade, such as they were, growth was driven by a housing boom and a consumer spending surge. Neither is coming back. There can’t be a new housing boom while the nation is still strewn with vacant houses and apartments left behind by the previous boom, and consumers — who are $11 trillion poorer than they were before the housing bust — are in no position to return to the buy-now-save-never habits of yore.
What’s left? A boom in business investment would be really helpful right now. But it’s hard to see where such a boom would come from: industry is awash in excess capacity, and commercial rents are plunging in the face of a huge oversupply of office space.
Can exports come to the rescue? For a while, a falling U.S. trade deficit helped cushion the economic slump. But the deficit is widening again, in part because China and other surplus countries are refusing to let their currencies adjust.
So the odds are that any good economic news you hear in the near future will be a blip, not an indication that we’re on our way to sustained recovery. But will policy makers misinterpret the news and repeat the mistakes of 1937? Actually, they already are."
Comments