Will The U.S. Return To Its Former Glory?
It’s hard to read an article about the present economic crisis without one pundit or another talking about when the U.S. will be fully recovered and they talk in depth about previous U and V shaped recessions, depressions and recoveries.
Those looking at a V shape believe that if the recession nosedived, which is one side of the V, then it should bottom out and quickly recover to its former glory, the other side of the V.
The U shapers believe that if a recession begins quickly, but then slows down, remains at the bottom for a while and then skyrockets back to its previous glory, that it is U shaped.
Which Are Right?
If you look at any of the previous recessions that were caused by the bursting of a huge speculative bubble, you will find that the recoveries took a long long time to come about, which suggests that the V shape believers are wrong in expecting a quick recovery from the present recession, because the economy cratered very quickly indeed.
Those that believe that we’re in a U shape right now are perhaps closer to the truth, because they believe that exiting from the present crisis will take a great deal of time.
U-shapers believe however, that what will drive the recovery is investors that slowly come back into the market to take advantage of the low prices.
This recession is so deep however, that it’s not investors that will have to bring about some kind of recovery, but consumers, and right now they’re not playing ball.
Consumers account for around 70% of the U.S. economy and they’re the ones that took a real beating this time, and until they start spending you can forget about any serious kind of recovery.
What, No V Or U Shaped Return To Former Glory?
The two chances of regaining what once was, are probably slim and nothing.
So When Will Consumers Start Fueling The Recovery?
The question might be better phrased, “how will consumers start fueling the economy?”.
The growing line of unemployed won’t fuel it, and householders will have a major problem getting home equity loans and perhaps worst of all, those that do have a little cash are intent on keeping it, and we just saw consumer confidence take another dive.
The probable truth is that America has seen the end of its economic, and perhaps its military hegemony, and Obama for right or wrong, certainly doesn’t want a return to either them.
America is surviving on loans right now, and will be for the foreseeable future.
The Chinese have a two billion dollar surplus, and will soon demand higher returns on their investment in the U.S. because they see it as overburdened with debt and that will only increase the U.S.’s debt mountain.
Americans will replace worn out cars and appliances of course, but who will invest in factories and businesses that build those things?
The original question was;
Will the U.S. Return To Its Former Glory?
The answer is almost certainly ‘no’, and a Scottish historian by the name of Professor Alexander Fraser Tyler, who wrote in 1787 about the decline and fall of the Athenian Republic over two thousand years before, perhaps explains it best.
“A democracy cannot exist as a permanent form of government. It can only exist until the voters discover that they can vote themselves largesse from the public treasury. From that moment on, the majority always votes for the candidates promising the most benefits from the public treasury, with the result that a democracy always collapses over loose fiscal policy, always followed by a dictatorship.”
“The average age of the world’s greatest civilizations has been 200 years. These nations have progressed through this sequence:
From bondage to spiritual faith
From spiritual faith to great courage
From courage to liberty
From liberty to abundance
From abundance to complacency
From complacency to apathy
From apathy to dependence
From dependence back again into bondage”.
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