Gloomy Economic Guru Says America Is Back

[DCBob]

by Al Lewis
Friday, January 28, 2011

Commentary: Robert Aliber is suddenly Mr. Sunshine
One of the gloomiest economists I know suddenly has become a bucket of sunshine.

Robert Z. Aliber, an author and professor emeritus at the University of Chicago who once worked beside economics icon Milton Friedman, predicts that in 2011:

the U.S. economy will grow 4.5% to 5%;
the stock market will rise 15%;
state financial crises will turn around as more vigorous economic growth benefits state revenue;
the "toxic debt" from the housing crisis will continue to be written down slowly, keeping the losses relatively low on an annualized basis;
the nation's unemployment rate will fall from its current haunt of more than 9% into the 7% range, as the United States reinvigorates its manufacturing sector by adjusting its trade imbalance with China;
China's economy will not overtake the United States any time soon, because the Chinese housing bubble is about to blow, doing the same thing to them as it did to us;
dire warnings about $4 a gallon gasoline are moot as commodity prices will fall amid China's sudden slowdown;
gold, that harbinger that all is not right with paper money, will plunge from its current heights of more than $1,300 an ounce to — get this — $874 an ounce as China gets margin calls.

"We will have restored our confidence in the resiliency of the American economy," Aliber declared. God, do I hate rosy forecasts.It isn't that I want the economy to flounder forever. It is just that I can't stand people talking up the market as if they belong to an underground ring of penny-stock promoters.

I am also influenced by emails I frequently receive from the economy's victims — those who have lost jobs and homes, or who have had to file bankruptcy because of catastrophic medical costs. On Monday, I received a survey by the Nielsen Co. via email. It said: "45% of North Americans still expect the recession to last for another year." What? Didn't these people get the memo from the National Bureau of Economic Research declaring that the recession officially ended in June 2009?

"Some people are still hurting," Aliber concedes. "But it's almost as if there are two economies: The cruise lines are full. The airplanes are more or less full. ... The auto market is picking up. ... The restaurant industry is picking up." It has all been propped up artificially by the government and the Federal Reserve, right? Oh, I wish I could dismiss Aliber as just another bow-tied, crackpot professor of the dismal science. But I can't.

Aliber, who foresaw the Asian crisis of 1998 and the bursting of the Internet bubble in 2001, has been something of a guiding light to me.

more: http://finance.yahoo.com/banking-budgeting/article/111966/gloomy-economic-guru-says-america-is-back

Wow. If the doom and gloomers are coming around this must be for real.

[Dover]

1. Yup....any minute now we're simply going to wake up as if from a bad dream.

:sarcasm:

Well on the bright side, if enough people believe this maybe gold will become affordable again.

[fasttense]

2. Who once worked beside economics icon Milton Friedman????

The "free" market idiots are out cheer leading the new economy. Funny how they never saw the crisis coming in the 1st place. But now they see wonders on wonders.

Milton Friedman was the biggest fool of all. He fabricated an economic theory so that old, rich, greedy white men would not have to feel bad about instituting fascism in America.

Does anyone with half a brain still believe Milton? Hasn't the crash shown what a con "free" market theory really is?

Steal now, pay later - Milton's philosophy.

[SoCalDem]

3. Yep.. the shells are all shined up & we have new cards..alll ready to start again

[FreakinDJ]

4. "by adjusting its trade imbalance with China" - like that will happen

Now I think the guy is "Full of Shit"

The Economic Think Tanks that Congress depends on to help shape the country's economic policy and even conduct sessions of U.S. Trade Negotiations, are like the "Who's Who" of foreign own corporations, and America's Wealthy Elite.

No it will remain "Outsource as Usual" until the working class rises up in revolt

http://publicintelligence.net/peterson-institute-for-international-economics/

[obxhead]

5. So China must fall into a failing scenario for us to start to come out

of this recession in a real way.

I notice how the article is short on details that explain why the economy of China will fail. Only that it will follow the same path as the US and it's going to happen soon!

[Still a Democrat]

6. The Perpetually Miserable won't like this

Our economy is definitely showing signs of recovery.

[mmonk]

7. Wall Street has been recovering.

Main Street has a long way to go.

[MineralMan]

8. It's interesting to look at the 5 year DJIA chart.

The 10 year chart is also interesting.

The 5-year chart shows the deep dip in 2008, followed by a strong upward trend that is continuing toward the 14000 high back in 2007.

The 10-year chart shows something else that's very interesting. You can see the dot com low, and the 2008 low. There's the double dip everyone's been talking about.

Even more interesting, though, is to look at the long-term chart, dating back to 1970. You can see this under the other DJI charts on Google Finance: http://www.google.com/finance

What it shows is a slow steady rise in the Dow since 1970, with an almost flat curve from 2002 on to today. Looking at long-term charts smooths out the brief major changes and gives an interesting look at the overall curve over a long period. From that perspective, the Dow has been pretty stagnant for some time, despite the short-term ups and downs. That bothers me more than temporary fluctuations.

[Statistical]

10. Remember DJIA chart doesn't reflect returned dividends.

The compounding effect of reinvesting dividends is significant.

Still DOW is a horrible metric for overall market. It reflects only 22 companies.

Still if you want to look at the DOW look at the growth between 1980s and 1995. Notice it is solid and steady then the angle steepens at 1995 to 2000.

Now go back to the 1980-1995 line. Now extend that line. It reaches our current position today. In essence if the market hadn't gone up that unsustainable rate in 1995-2000 period and instead had grown at the slower but more sustainable rate we likely would be in the same exact place today.

Another way to look at it is over 20 years the DOW has returned +178% gain in capital appreciation but another 78% in dividends. If th e dividends were reinvested total gains would be +287%. Trippling your money ever two decades is a good way to get rich slow.

[MineralMan]

12. Yah. I know what the Dow represents. I'm talking about its level.

It is what it is. There are many other factors that are in play, but that's one of them. And you're right about the overall growth over a long period.

[girl gone mad]

9. 8 Reasons Why This So-Called Recovery Is Worse Than Any In History

The majority of economists and strategists are now telling anyone who will listen that the economic recovery is now normal and are trumpeting this view to jump-start the stock market. They are confidently asserting that "the new normal" concept popularized by Pimco is now a moot issue.

In fact, there is nothing in the major economic indicators to indicate that the current recovery is anything other than anemic. We have taken eight major economic indicators and compared them to where they are now versus the economic peak 36 months ago. We did the same for the equivalent time periods for the prior two business cycles, using the official dates designated by the National Bureau of Economic Research. We did not use surveys, opinions or diffusion indexes, but relied instead on the major basic indicators measuring employment, income, consumption, production, housing and capital expenditures.

As was true when we did a similar study about four months ago, the results are very clear that the current recovery is far weaker than the prior two expansionary periods, which themselves were below the average of other post-war expansions. The results are summarized as follows.

1. GDP was up an average of 6.4% from the prior peak at this point in the last two cycles, and only 0.2% now.

2. New home sales were up 23% then; down 47% now.

3. Retail sales were up 14% then, 1% now.

4. Industrial production was up 2.5% then, down 5.6% now.

5. Non-farm payroll employment was down 0.1% then, down 5.2% now

6. Personal income was up 11% then, 4% now.

7. New orders for durable goods were up 6.2% then, down 2.2% now.

8. Initial weekly unemployment claims were down 8% then, up 22% now.

Conclusion: You call this a recovery?

The facts speak for themselves. The current recovery is far weaker than the prior two across a broad array of major economic numbers, and the Fed apparently agrees.

Read more: http://www.businessinsider.com/worst-recovery-ever-2011-1?slop=1#slideshow-start#ixzz1CLmQ6hSV

[Scurrilous]

11. K & R

:thumbsup:

[Octafish]

13. ''It's almost as if there are two economies.''

Yes, professor: The Haves and the Have-Mores.

The rest of us get the scraps.