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Posted: Wed Dec 24, 2008 3:15 pm Post subject: Why the U.S. Economy will Boom in the 2010s |
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Typically, whenever non-economist journalists talk about the economy, they only cite the production side, while ignoring the consumption side. So, when the quantity of production decreases less than the quantity of consumption increases, the economy is described as negative by these journalists.
In this severe recession, we've seen mortgage rates fall to 5%, autos being sold at costs, gasoline falling from $4.11 to $1.66 a gallon, milk prices falling, lower airfares, retailers selling below costs to clear inventories, etc. When these excess goods clear the market, then real output and inflation, or nominal output, will accelerate and spur "animal spirits," creating a production boom.
There was a huge global economic boom from 2002-2008 (chart below). World real per capita GDP was flat for 15 years. Then, beginning in 2002, it rocketed. Basically, export-led countries overproduced by large margins and underconsumed by large margins, while the U.S. underproduced by a small margin and overconsumed by a large margin. In the 2010s, the U.S. will overproduce slightly and overconsume less, while export-led countries will underconsume less and overproduce less.
Labor economists refer to the 35-54 age group as "prime-age," which is the most productive group. The 55-64 age group is the second most productive group (based on education, experience, and training). An increase in the 16-24 and over 65 groups have negative effects on GDP growth. If you look at long-wave economic booms and busts, uneven labor supply is the most powerful factor. Afterall, economies are made up of people.
The last of the U.S. Baby-Boomers will reach 65 in 2029. There were U.S. deep depressions from 1873-79 and 1929-38. Keynesian economics prevented another deep depression from 1973-82 (although, there were three major recessions in a period of accelerating inflation). However, Keynesian economics softened the 10-year bust in the 1970s, and will prevent another deep depression in the 2030s.
http://2.bp.blogspot.com/_otfwl2zc6Qc/STCkwME3I2I/AAAAAAAAH3c/ee8RtszfDt4/s1600-h/world.bmp |
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