Re: The US economy tops the world….
Posted: Sun Oct 29, 2023 9:59 am
Not because we are slow and stupid. It just takes time for positive economic indicators to translate into better results in the Real World.
Best example of this was in fall of 1992. The widespread perception was that the economy was in the toilet, but the numbers actually started turning around in September of 1992, but that didn't translate into a perceptible change for regular folks until 1993, by which time George H.W. Bush was out of office.
It is important to keep in mind that both the US Government and US Economy are gigantic things and you can't turn them around on a dime. It takes years for a change in direction to distribute through all of the secondary nodes and start making a noticeable difference. It is reasonable to expect that any policy changes will take two to three years to manifest themselves in the real world. And even that assumes that the policy changes are good ones and are implemented well.
Having said all that, I think the inflation number is unrealistically low and a statistical artifact, largely caused by the fact that petroleum prices are down this last quarter. So when you average everything out it comes to 2.4%, but that hides still-substantial growth in food and consumer goods prices. I think that we should reasonably expect high structural inflation in the next few decades. One reason is that offshoring manufacturing to China is played out -- that alone took several percentage points off the inflation rate in the last twenty years. Another reason is that we are committed to enormous capital investments in infrastructure in the coming decades, after about forty years of benign neglect. Both of those things are going to drive inflation to higher levels.
Best example of this was in fall of 1992. The widespread perception was that the economy was in the toilet, but the numbers actually started turning around in September of 1992, but that didn't translate into a perceptible change for regular folks until 1993, by which time George H.W. Bush was out of office.
It is important to keep in mind that both the US Government and US Economy are gigantic things and you can't turn them around on a dime. It takes years for a change in direction to distribute through all of the secondary nodes and start making a noticeable difference. It is reasonable to expect that any policy changes will take two to three years to manifest themselves in the real world. And even that assumes that the policy changes are good ones and are implemented well.
Having said all that, I think the inflation number is unrealistically low and a statistical artifact, largely caused by the fact that petroleum prices are down this last quarter. So when you average everything out it comes to 2.4%, but that hides still-substantial growth in food and consumer goods prices. I think that we should reasonably expect high structural inflation in the next few decades. One reason is that offshoring manufacturing to China is played out -- that alone took several percentage points off the inflation rate in the last twenty years. Another reason is that we are committed to enormous capital investments in infrastructure in the coming decades, after about forty years of benign neglect. Both of those things are going to drive inflation to higher levels.