'Lost Decade? Here We Come!'
“2.4 percent annual growth? Just kidding!” Samuel R. Staley writes at the Corner:
“2.4 percent annual growth? Just kidding!” That’s what the U.S. Department of Commerce effectively said when it reported today that second-quarter 2010 growth was really just 1.6 percent. Leaving aside the extraordinary size of the downward adjustment — one-third lower than initial estimates from last month — these numbers do not bode well for the U.S. economy.
While growth was still positive, its rate is downright anemic in the wake of such a steep recession. Moreover, estimates of consumer spending were adjusted upward, showing just how weak the Keynesian concept of demand-led growth, boosted by government spending, really is.
Ultimately, the U.S. economy needs a major supply-side adjustment to bring investment in line with real consumer demand, not the smoke-and-mirrors kind promoted by federal largesse. The commercial real-estate market needs to sort itself out before meaningful, growth-inducing lending can occur, but with the economy in such disarray, many banks still don’t know how to value the real-estate assets on their books.
Charles Krauthammer adds:
I think there‘s something new happening in terms of the economy, at least the perception of it, and that is a return of fear. We had the panic of course, the full blown panic attack in September, October ’08, where everybody had a sense that we were going over a cliff.
What happened in ‘09 I think was a sense of yes, we’re in a recession. Things aren’t good. But as Obama himself said, we were pulled back from the brink. And we were in a bad time, but not a scary time. And we had improving numbers by the end of ‘09. At one point we had a recovery of the market to about 11,000. And we had a GDP growth at the end of ‘09 of about 5 percent.
In 2010, we started slipping again, and slipping rather badly, GDP numbers sliding very much. They‘re going to be stagnant now. Shockingly bad numbers on housing this week. The idea that the Fed has run out of options.
And I think what’s returning is a sense we might not just be in doldrums here — a pause, as was suggested in mid-year — but headed into a double dip — or worse. And you see that in the jitteriness of the stock market.
And that I think is new. If economic times are bad, the party in power is in trouble. If people are seized with fear, the party in power has no chance whatsoever.
In the meantime, we have only the audacity of taupe to console us.