Provident free market leaps from closet, saves the day.

(10 am. – promoted by ek hornbeck)

I love it when a completely unexpected and unwarranted assumption jumps out of the closet at the end of a story to vandalize a perfectly good economic horror show with a smiley face.  

Consensus on U.S. growth this year is around 3.5%…But where will this expected growth come from?

First, the deleveraging process is far from over. In fact, It didn’t even begin…

Second, Congress isn’t debating whether fiscal policy has to be tightened — but by how much… Fiscal tightening is a huge swing from the fiscal stimulus position the U.S. economy currently enjoys.

Third, the Fed is moving slowly to prepare the markets for less monetary stimulus for the economy.

[Fourth:] The consumer sector (which accounts for a bit more than 70% of U.S. GDP)…With credit conditions relatively tight and the need to delever still in place, credit-financed consumption growth is some years off.

[Fifth:] Employment growth is barely enough to provide jobs for new entrants…As a consequence, income- and credit-based consumption growth are unlikely to provide the economic motor with the much-needed fuel that replaces the dwindling monetary and fiscal stimulus fuel.

[Sixth:]This leaves us with the investment and net export sectors of the economy to justify a 3.5% growth expectation…but keep in mind that sluggish consumption growth will likely put a dent in investment spending plans…net exports — the component that feeds directly into the GDP figures — are declining again after three years of improvement. The export sector won’t save the day.

To conclude: The U.S. economy will grow over time, if only for the natural tendency of a free market economy to seek an increase of the well being of its citizens.

In concise, mathematical terms,

– 1 – 1 – 1 – 1 – 1 – 1 (+ free market love!) = growth.

Sure, the economy is going down the crapper, but thank ye, lord, for the impending beneficence of free markets.

Feel better?


Skip to comment form

  1. goddamned evidence to the contrary, is, as Spock would say, “fascinating.”

    • Edger on March 25, 2011 at 10:49 pm

    after hearing how well this news was received by the media and by the two political parties….

    • banger on March 26, 2011 at 3:03 pm

    I can telly you there is definitely a recovery and there was bound to be one with the low interest rates and money-printing we’ve seen.

    I think what “the natural tendency of a free market economy to seek an increase of the well being of its citizens” quote is one of the most ridiculous statements I’ve ever seen or heard yet it contains some truth. First there is no such thing even remotely resembling a free-market and there never has been and never will be such a thing. I try to explain that the idea is merely a model that is useful as a place to start theorizing from. All economics is, first, political but that understanding seems to have been lost.

    Also, the current market economy has no interest in the slightest in the “well-being” of anyone–just to set matters straight–it’s function is to marry buyers and sellers and nothing more.

    Where is the truth in the statement? The truth is that we live in a consumer-based economy that equates status (and thus well-being) with purchasing products that “says” something about us. This is, first of all, an essential human need and the marketers, advertisers, PR, and entertainment industry wizards know this and mine it, along with all kinds of other needs, to link those needs with buying products. They use our unconscious motivations to lure us into buying whether or not we have a “real” need to do so.

    In short, I believe the economy will at least maintain anemic growth for some time based just on the pent-up demand that comes from incessant media watching and a general culture of dependence on external markers. In the end, life goes on and people need to get laid–and that means spending money to appear to be a good match to members of the opposite sex as well as to earn respect in your daily life. If I have on what are obviously expensive clothes it will automatically insure respect in a room when I speak whether I’m a man or a woman in most places (the sixties is long gone). The same goes for cars, housing, and you name it. This is the nitty-gritty of life and people are willing to do whatever they have to do to get by–that’s why capitalism as it stands now is so robust–it deals with primal issues. Until we find an alternative people will return to the markets again and again to meet those essential needs as community and community values and even the idea of that people can find alternatives fades from view.  

  2. … category of market institutions, which makes it a myth.

    And myths do not have natural tendencies that can affect anything other than the storyline as it is retold.

    The natural tendency of non-competitive markets is to use freedom to harvest any excess economic profits that may be available under current conditions, with the tendency the greatest for monopoly markets, and the degree that the tendency is tempered by rivalry among oligopoly heavily dependent on the specifics of any particular market, so anyone peddling an “overall natural tendency” for all oligopolies is peddling horseshit.

    A natural tendency of competitive markets is to tend toward lower private cost, but since this is as often found through passing the cost onto others so the private cost is a smaller share of the lower total cost, as to reducing total social cost, there is not even any reliable between that tendency and net public benefit.

  3. the deleveraging process…didn’t even begin…


Comments have been disabled.