The New Normal: Probably Valid Idea

Posted on August 17th, 2010 by admin in Political Economy

This article from Wall St. Journal on 8-16-10 gives an excellent (IMHO) overview, at the correct level of detail, of the current and future macrostructure of the US economy. The author, Mort Zuckerman, editor of US News and World Report, very usefully acknowledges and analyzes the impact of what I call the “huge fact”: the permanent unemployment of millions of Americans.

Most current market analyses and commentary fail to take this huge fact into account in any serious way.

I believe the idea of a “new normal”, meaning a very slowly growing US economy, will be valid for many years to come. Unfortunately, the current pack of malignant bureaucrats and politicians always choose pandering or ideology over actual problem solving, so the exactly wrong regulatory frameworks are usually installed (e.g., “healthcare reform” laws, “financial reform” laws, “net neutrality”, making Fannie/Freddie even more supportive of people who cannot afford to buy a house, …). Thus, we will be stuck with the New Normal or a similar scenario, unless at least one or both of these possible events occur:

  1. The current Regime becomes paralyzed and unable to pass any more dangerous laws affecting the economy, e.g., after 2 NOV 10 (an obvious speculation is available around this idea!)
  2. Technology proceeds apace and radical innovations take hold….but this is a 5 to 10 year event horizon before the economy could be affected (consider the WWW was launched c1993 by Netscape and while its future impact was widely acknowledged then, it’s taken until roughly 2003 to become transformative in the economy).

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