WhatFinger

The downside for the U.S. economy as a whole isn’t enormous here -- we just don’t have that much further to fall because we never really got up

U.S. Economy Won’t Collapse Any Time Soon—Here’s 5 Reasons Why

By Lorimer Wilson ——--September 13, 2011

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A good way to think about our country's economy is to think of the U.S. like a boxer. We were knocked flat on our back in 2008 and have since struggled to one knee but have never got back to our feet. [As such,] those conversations that imply we might be on the verge of falling down again are rather pointless…With this much slack in the economy, it’s unlikely that any economic downturn from here will be substantial. Does that mean I think the U.S. economy can’t contract from here? No, but I would be very surprised if we were to experience another blow similar to the 2008 recession where real GDP fell 5%. [Let me explain.]
So says Cullen Roche (www.pragcap.com) in an article* which Lorimer Wilson, editor of www.munKNEE.com (Your Key to Making Money!), has further edited ([ ]), abridged (…) and reformatted below for the sake of clarity and brevity to ensure a fast and easy read. The author’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article. The article goes on to say, in part:
To put this argument into some perspective, analysts at ING tend to agree. They see the economy as muddling through, but not collapsing. They cite 5 reasons for this perspective:
  • Cyclical sensitive sectors, namely the housing sector and the auto sector, are already weak and are unlikely to contract much more.
  • Households’ balance sheets have improved since the global financial crisis. Lower rates over a considerable period of time benefit net borrowers. Most US households will benefit from low borrowing rates.
  • The trade deficit is likely to narrow due to slower import growth, decline in energy and commodity prices and a weak trade weighted dollar.
  • Decline in commodity prices will check headline inflation and could lift households’ purchasing power.
  • Investors’ fears are based on their most recent experience. The unpleasant memories of the global financial crisis are biasing investors’ sentiments.
Equity markets could be a bit of a different story here. I am actually becoming increasingly concerned about a potential profits recession in the USA as international growth tapers off (remember, the market is not the economy). With all of the doom and gloom in the air, [however,] I think it’s important to keep things in some perspective: the downside for the U.S. economy as a whole isn’t enormous here – we just don’t have that much further to fall because we never really got up.
Related Article: 1. Are We On the Verge of a Second Recession? Is a second recession in so short of a time in the offing? It certainly seems that way. The hope for a continued recovery has grown dim lately as many of the economic indexes are moving towards contractionary territory… There are several concerns pressing the U.S. economy and, in the words of David Rosenberg, chief economist at Gluskin Sheff, “one small shock” could send us into a second recession. [We, for our part, believe that even] another round of Quantitative Easing by the Fed…may not be enough to offset the real problems facing the U.S. economy. [Let's take a closer look.]

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Lorimer Wilson——

<em>Lorimer Wilson is the Editor of munKNEE.com

Lorimer is also a writer, analyst and commentator on the economic, financial and investment environment around the world and has recently been identified as the 12th most-read such writer on the internet out of over 500 frequent contributors.

His articles are unique, insightful, informative, instructive and well researched analyses of the economy and marketplace and posted regularly on more than 50 financial sites at the present time.

Lorimer also is an accomplished editor posting edited excerpts of other author’s articles on his site to provide his visitors with a fast and easy read of some of the best articles to be found on the internet on any given day.

His editorial skills are available for hire should you have an article, book or other written material that needs to be fine-tuned before publication. </a>

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