Some More Optimism

crazynutjob:

Someone forwarded the notion that things are generally not as bad or as good as they seem. I think things really can be as bad as they seem, but we must keep in mind that not every problem must be solved before we can move on. I’ll wax philosophical and say that applies to society, but I actually just mean it for the economy. All I can really say is that something must be solved before a sustainable recovery can occur. Find the one thing you think has been solved in this economy and use that as your source of hope. I still haven’t found anything… yet.

So you want something that has been solved.  Well, I’m not sure I believe this, but I think it might be possible …

Suppose the major problem in the economy was the erosion of the personal savings rate, which had collapsed over the last few years.  The bailout crisis last September scared everyone into thinking that the next Great Depression was upon us, so everyone started to save again.  You would naturally expect this to hit GDP pretty hard, but then you’d expect everything to stabilize a bit once people returned to their historic and natural rate of savings.  And since we’ve returned to a more natural rate, maybe things are stabilizing.

The change in personal savings neatly (perhaps too neatly) explains the change in our economic numbers.  Since we’re talking about a 5% reduction in spending, it’s not insane that this would cause a 5% increase in unemployment.  (Not that there is a 1-to-1 relationship between these numbers, but it wouldn’t be surprising that they’d be closely related).  The change in the savings rate also correlates neatly with the drop in GDP.

We definitely want people to be saving some money, so the return of personal savings is certainly a healthy economic development.  Perhaps, then, it’s not crazy to think the economy is really getting better.

Again, I’m not sure I believe this … I worry that the Government’s policies have created more problems than we’ve solved … but the return of personal savings is certainly a good thing, and one, I might add, that was brought about with no help from the Government.

Source: crazynutjob

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