Opti,
I've felt very strong about the US economy the past year and a half.
1. Lots of government spending
2. Lower taxes
Both put more money in play ( Buff will have the rebuke on the negatives ;-) )
Of course, that raises the debt. That's another argument entirely as to what is a sustainable debt ratio but debt/GDP is about 63% which is not a record for the US nor even highest among the G8 countries. It was about 59% when Bush took office. Its higher than it was recently.
The US GDP has increased about $700 billion this year. Of that $700billion, the breakdown is roughly:
1. 63% private consumption expenditures
2. 29% Gross private domestic investment
3. 14% Government expenses
4. -6% Exports
I think the relationship between sentiment and strength of the economy goes both ways. Yeah, I think the economy can get better when sentiment is low expecially given that sentiment measures the feelings of everyone regarding the economy and aggregate unweighted opinion is often wrong.
Take the well-known case of the the stock market, for example. The market often rises off it's low when sentiment is at its lowest (which makes sense since most people extrapolate the present conditions and trends to the near future). People see rising unemployment and think it will continue forever.
People see a one or a two quarter recession and think we're heading into a 21st Century Great Depression.
How often have we heard proclaimed such statements as "the highest x" ever? The "worst y" ever? Usually just at the point when things are their worst (and never really that bad historically to begin with).
I don't know about election year sentiment. I think it's a little easier to scare people into thinking things are bad rather than good and the press seems to find such stories interesting anyway. I think high fuel prices are keeping sentiment from going even higher.
Well, now we're going to get rising interest rates and will likely get less government spending and maybe higher taxes depending on who wins the election. And regardless of which way oil prices go in the near future it seems they will go higher in the coming years as China's fuel usage increases at amazing rates though the rule of thumb is - .1% GDP for every 10% increase in oil prices so it's more of a hindrance than a real negative. I'm less optimistic on 2005 with all that but no one ever knows how long such things take to run their course. It being the dismal science and all. Probably just in time for Kerry, if elected, to inherit a 4th quarter 2005 slowdown for the Republicans to say he ruined the Bush recovery and for the Democrats to say it's really the fault of Bush.
Last edited by Colin at May 28 2004, 06:13 AM
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