Omakase

Thursday, January 05, 2006

If you read only one economics article this year......

Read this one - it's an excellent, even handed bull/bear argument on the state and future of our economy.

I agreed with both authors: yes, the US economy and market is amazingly resilient and a good investment, but I also see the point about the foreign markets.

3 points that really jumped out:

1) I was abosultely stunned by the convincing point made that the Bush tax cuts were instrumental in the economic recovery. There's just no disputing that 9 quarters of decline in investment were absolutely (and significantly) reversed by the passage of the Bush tax cuts. There's surely some cyclicality at work here, but the net effect is clear, correlated, and positive.

2) I was equally stunned by how large of an impact the housing boom has had on the economy, as indicated in the second chart. I had previously thought that while the housing boom was a net positive, that it was ultimately a very small contributor to the larger economy. It turns out that when GDP growth is netted against mortgage equity withdrawal, the non-housing economy was in recession for nearly three years.

3) It is strange to say it, but I didn't realize that the US economy was still the largest exporter in the world, and that US manufacturing reached an all-time high in November. I guess I let all the negative impression of our economic base provided by the mass media to displace reality. Seriously, if you picked up a dozen issues of Fortune, the NYT, and the like, you'd think that CHina was already the largest exporter, and that US manufacturing was fading.


Overall, I tend to believe that the US economy is incredibly resilient and tending towards the head of the curve, meaning that consumer adoption of mortgage financing as more than a home financing tool is probably just Americans figuring out a good deal, and taking advantage of it. After all - it appears that while we may question individual investment and spending choices (why does anyone need a monsterous SUV?), in aggregate, Americans are very efficient.

WSJ.com - Reasons to Pout?

With my new friends on the Great Wall of China

With my new friends on the Great Wall of China
Click to go to my online photography

World sun clock

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Uncommon Man's Creed

"I do not choose to be a common man. It is my right to be uncommon -- if I can. I seek opportunity -- not security. I do not wish to be a kept citizen, humbled and dulled by having the state look after me. I wish to take the calculated risk; to dream and to build, to fail and to succeed. I refuse to barter incentive for a dole, I prefer the challenges of life to the guaranteed existence; the thrill of fulfillment to the stale calm of utopia. I will not trade freedom for beneficence, nor my dignity for a handout. I will never cower before any master, nor bend to any threat. It is my heritage to stand erect, proud, and unafraid, to think and act for myself, to enjoy the benefit of my creations, and to face the world boldly and say, "this I have done." All this is what it means to be an American." -- Anonymous