Editor’s Note: The following piece, exclusive to GPS, comes from Wikistrat, the world's first massively multiplayer online consultancy. It leverages a global network of subject-matter experts via a crowd-sourcing methodology to provide unique insights.
The U.S. economy is most definitely in recovery mode, but it’s the sort of recovery one experiences after a scary heart attack. There is little confidence in being able to go uptempo. Fears persist about slipping into a permanent sort of disability.
Worse, many are resigned to the fact that big structural problems such as health care, tax reform, the federal deficit and education remain unaddressed by a political system that remains fiercely divided.
So America finds itself in a funny position: Clearly getting better and doing better than most of the West but almost completely lacking in self-confidence. If this is “morning in America,” then most citizens have hit their snooze button.
This week’s Wikistrat’s drill explores this ambivalence in the face of mounting good economic news, asking our global community of experts to present their arguments for the U.S. economy’s possible mid-term (3-5 year) paths ahead. We’ll start with the optimism and then let the darker thoughts pile up - much like most Americans today.
The optimistic view
There are plenty of reasons to be optimistic about America’s long-term fundamentals. America is experiencing a boom in energy production (significant in oil, truly revolutionary in natural gas) that will do more than just limit our dependence on foreign sources, it will reassert our nation’s past standing as an energy exporter of note.
While some lawmakers, environmentalists and manufacturers want to keep the current natural gas glut in place, the industry is poised to begin exporting liquefied natural gas in a big way - possibly as much as one-quarter of our national production within a half-decade. That will help our trade deficit plenty, and in more ways than one. Because we’ll enjoy an abundance of cheap natural gas over the long haul, we’ll use less of our high-quality coal in electricity generation and thus be able to export that as well, with rising India and China becoming major consumers. This could all occur despite the significant transportation costs.
Add to this the fact that a rising Asia is finding it harder and harder to feed itself, and thus turns ever more to agricultural superpower America.
Yes, we realize that these uplifting projections make America sound like a commodity exporter and not much else, but all that cheap gas will help our manufacturing base become a lot more competitive too. And amidst the rise of globalization’s burgeoning middle class, don’t forget our enduring/renewed prowess in the automotive, aerospace, electronic sectors. All those new consumers crave mobility, leisure, mass media and the like.
U.S. corporations are sitting on record amounts of cash. If we can just get them past some of their great anxiety over the uncertainties surrounding the federal deficit, taxation, regulations, the still unresolved housing crisis and health care reform, our economy is poised for a solid long-term run - especially when you consider our demographics (e.g., we remain youthful thanks to high immigration and birthrates) relative to Europe or even rapidly aging China.
Even the rancorous politics should clear up soon enough. The Democrats should hold onto the White House while the Republicans regain the Senate in addition to the House, yielding the sort of split government that often fosters pragmatic compromise - especially from a second-term president.
So chin up, America! Asia will keep rising and Europe won’t fall apart. Meanwhile, Latin America and Africa are doing great, even as the Middle East processes its Arab Spring. Overall, this is a great overall trajectory, considering how bad things were just 3-4 years ago.
The more-of-the-same view
Sad to say, this is the conventional wisdom, most notably found in the analysis of the International Monetary Fund. It says - in so many words - that America is locked into 1-3% annual growth (which feels like treading water once inflation is factored in), Europe will remain severely hobbled by its fiscal crises for the foreseeable future, and China, recently the global economy’s main engine of growth, will settle into a slow decline from its unprecedented growth trajectory. With the Big Three all on such relatively depressing glide paths, it’s hard to see how America truly recovers.
Frankly, even admitting that such global economic realities limit our medium-term upside is revolutionary in itself. For as long as most of us can remember, a rebounding America could - on its own - drive a global recovery. But those days are over, and the truth is the world relies on Beijing’s economic decision-making as much or more than on Washington’s.
Putting aside all the silly hype on China’s economic miracle - already fading, we face the depressing reality that the global economy will have to suffer the Middle Kingdom’s difficult transition from extensive growth (just add more labor and resources) to intensive growth (just add more technology and innovation), with all the tumultuous democratization implied.
Back home, the harsh truth is that our recovery is held hostage to all manner of looming domestic shocks (e.g., student loan crisis, local governments’ defaults) and international shocks (war in the Persian Gulf, sovereign default in Europe, “hard” landing by China), and one of which could send us stumbling again.
Meanwhile, our stubborn housing crisis keeps too many of our workers tied down, unable to move to better jobs (like those associated with the “fracking revolution” in natural gas). Overall, 1-out-of-6 American workers remains either unemployed or significantly underemployed, and darn near everybody still carries way too much consumer debt.
Put it all together and we should be grateful America hasn’t turned into Europe – yet.
The pessimistic view
The most depressing view simply assumes that some combination of domestic and international shocks will do us in. China, for example, has just suffered its biggest trade deficit in over 20 years, and, if Greece doesn’t torpedo the Euro Zone, then Italy or Spain eventually will. Most dangerously, Iran’s stubborn reach for the nuclear bomb will invariably trigger a debilitating war in the Persian Gulf, sending oil prices skyrocketing - and nothing guarantees a global recession like a nice spike in energy costs.
Against that depressing international backdrop, Washington’s amazingly dysfunctional political gridlock will only grow worse across the most expensive and caustic presidential election in history.
Obama will prevail, but he’ll be so damaged that he’ll be a lame duck from day one. Then tee up the “doomsday” scenario of 1 January 2013, when the Bush tax cuts and the Obama extension of unemployment benefits and Congress’s payroll tax holiday all end simultaneously and we’re collectively in deep trouble - plain and simple. You might as well start stockpiling canned goods in your basement.
The silver lining in the worst-case scenario? Historically, when Washington messes things up this badly, bold new answers emerge outside of Washington and the two-party system. We realize that statement comes off like an “insert miracle here” promise of visionary leaders to be named later, but hey, it’s happened plenty of time before.
* * *
That’s Wikistrat’s “wisdom of the crowd” for this week.
Now tell us which path you find most plausible, or what other scenarios you can envision in the comments section below. And be sure to check out more at Wikistrat.com, a cutting-edge global consultancy.
Lick your wounds, all you freedom fighters. The bad guys won that last round. Rest up, because the gear is still moving, only bigger and stronger this time. We are pointing toward the cheap seats!
I quite like the idea of "licking the wounds". Indeed America has been plagued by both "domestic" and "international" shocks. The mental strenght of the Americans and their ability to adapt themselves will be the litmus test, whether the U.S. is able to keep its rank as the world's largest economy.
So who are the bad guys and who are the good guys in your world?
The bad guys were as far as i know the people who did finance with the bank of england, and all parties down the line.
Autopijaca Sarajevo je zasigurno najposjećenija autopijaca u Bosni i Hercegovini, a imamo namjeru da uskoro posjetimo i ostale autopijace širom BiH, kao što su autopijaca Brčko, autopijaca Vitez, autopijaca Mostar, te ostala značajna mjesta gdje se vrši trgovina polovnih vozila.
Dam Bosnia, I tell you what! You did cost many American lives and Millions of Dollars.
At the moment, we seen you are supporting Alqaeda and Taliban, secretly.
Mmmm, I hate to be rude, can you write your reply in English? We the Americans value your feedback.
the person who spoke in Bosnian...is just talking about car dealers/markets in his country, lol
The end is nigh! Repent, but more importantly, freakin' PARTY!!! \m/
Of course we're going to hear a lot of hallabaloo about how our economy is improving and that things will soon start "coming up roses". In the long run however, things will eventually deteriorate as our spending deficit grows due to our excessive and unnecessary military spending and our foreign aid givaways. Does anyone here know the history of the Roman Empire? I suppose that very few of you do!!!
Well GP, if you're not familiar with Paul Craig Roberts, you should become so. You can find all kinds of video interviews on the net. The decline of the Roman empire may have taken place over a century or two, however, the decline of the American empire will likely be much faster. Yes, the data, reports, analysis, and statistics in the media are not always a true reflection of reality. In fact, sometimes we see outright contradictions. There is obviously much fragility throughout the world, and in many forms. America has already entered it's phase of global retraction. And this will obviously have pros and cons. So be it.
Actually I've studied Rome extensively. In fact, as a little parlor game I like to compare our civilizations and think about where we are in relation to where Rome was in its history. For example, I think right now America is where Rome was around 200 AD:
our civilization has passed its zenith, and while we are still quite powerful, cracks are beginning to emerge and internal divisions are growing as to how to fix them. Rifts are growing among all levels of society (ie the rise of Christianity for them, class and political divisions for us).
Meanwhile, the dynamic pragmatism and near obsessive drive and work ethic that defined our early cultures has long been replaced by a sort of self-serving, lethargic gluttony. Both of us have been sitting back and getting fat on the fruits of our labor.
Not to mention that we have both been spending vast sums of money on military expenditures at the expense of our domestic problems. Compare the fact that we spend more on defense than the next 14 countries combined to Septimius Severus' dying words to his son: "Be harmonious, enrich the soldiers, and scorn all other men." Rome wasted its fortune on its military; how well did it turn out for them?
Of course no two civilizations will walk the same path or make the the same decisions, but they all roughly follow the same bell curve of rise, rest, and fall.
I hope that my little comparison is wrong, however, because if history repeats itself then that means we could be headed for troubled times (think of the constant in-fighting and resulting self-destruction of the barracks emperors.)
Thank you, Kuato Lives. Your post is quite insightful and accurate as well.
I agree.Even though Roman empire at its end was too big so it split.We are giving birth to not a meager crack, but a rift.Politically,The Euro can bind Europe together if things go well, and China will do well in the long run,(as it has for its long history). But I put it this way:
I like to put the evolution of superpowers as very similar to the evolution of Hawaiian shield volcanoes.First we come from the sea(when the superpower is growing vigorously and becomes bigger and bigger,Basically the (pre- superpower stage),then we are on land and start to get far stronger and tangle with our big neighbors(the shield stage)then we are in a quieter and weaker stage.We are beginning to slow and come apart.we are still active though, But this it the post shield stage.It is the beginning of the end.but it will get worse.We begin to erode in the next stage,our infrastructure crumbling, our people falling apart,political and geopolitical rifts being produced.we are challenged by developing nations in the first stage.we lose our ingenuity and we become selfish.(the erosional stage.)we may rejuvenate but it will not help (the rejuvenated stage)Then we get swept under the seas,never to be strong again in the world(the guyot stage.
Well said! A good point and a good explanation.
Our foreign aid budget is a fraction of our government's spending. It is insignificant, 1.28% according to politifact.
Our most significant armed forces commitments are winding down in Afghanistan and Iraq. So long as we can prevent our government from getting involved in more wars, our military spending should decrease. Our debt is manageable if we act with a Simpson Bowles type plan within the next 3 to 5 years I would say. Ironically, the bad global economy is what is keeping our bonds selling high.
The muslim whack jobs never have a come back to facts that are reliable, valid and verifiable.
Here is what the Qur'an tells them:
Funny, here is what moslems are told to do and say about lying:
Bukhari:V7B67N427 "The Prophet said, 'If I take an oath and later find something else better than that, then I do what is better and expiate my oath.'"
Qur'an 9:3 "Allah and His Messenger dissolve obligations."
Qur'an 66:2 "Allah has already sanctioned for you the dissolution of your vows."
Bukhari:V4B52N268 "Allah's Apostle said, 'War is deceit.'"
Qur'an 4:142 "Surely the hypocrites strive to deceive Allah. He shall retaliate by deceiving them."
Bukhari:V7B71N661 "Magic was worked on Allah's Apostle and he was bewitched so that he began to imagine doing things which in fact, he had not done."
Bukhari:V6B60N8 "Umar said, 'Our best Qur'an reciter is Ubai. And in spite of this, we leave out some of his statements because Allah's Apostle himself said, "Whatever verse or revelation We abrogate or cause to be forgotten We bring a better one."
Qur'an 33:11 "In that situation the Believers were sorely tried and shaken as by a tremendous shaking. And behold! The Hypocrites and those in whose hearts is a disease said: 'Allah and His Messenger promised us nothing but delusion; they have promised only to deceive us."
Qur'an 33:14 "Say: Flight will not avail you if you flee from death, killing, or slaughter. In that case you will not be allowed to enjoy yourselves but a little while. Say, 'Who will screen you, saving you from Allah if he intends to harm and injure you?'"
New discussion, old George err Abdul, spewing poison and trying to sow dissent.
Would you islamic fanatics ever stop!
If you do stop, it will be a shame because we have never laughed so hard.
"hallabaloo?" did you mean "allahu akbar?"
I find it quite curious Lionel, that anyone who doesn't see things your way is automatically an Islamic fanatic. Neither do I and I am a Christian who hates the idea of starting a useless and unnecessary war anywhere which causes nothing but needless death and destruction!
McCarthy, do yourself a favor and disregard Lionel, Patrick, or whatever names he might go by. Perhaps one day he might shock the heck out of us by saying something even remotely intelligent.
Sure thing Joseph you and your girlfiends are Christians. hehehe...
We have followed your rantings for too long to believe anything you say.
Bosnia did waste lots of American lives and Millions of Dollars, back in the Year 1992.
At the past and at the moment, Bosnians who do have highest positions in America and Canada, were working against American interests, by supporting their fellow Muslim Brothers and Sisters.
On the subject of energy and water, I've always thought they were the two most important resources to make a nation secure. If the President believes domestic fossil fuel production will be inadequate for the next few decades, why are domestic producers exporting some of that oil?
I know the reason: China, India, and Brazil.
China isn't exporting much of its rare earth metals.
Their is a point here, and I wish the administration and Big Oil would get it. Rep. Markey D-Mass. is seeing the future and wants to make sure the Keystone pipeline oil stays in America.
I'm not sure our policy makers understand the enormity of America's energy and fiscal problems.
Somehow I do not believe the US exports were comprised so much of raw oil, as it was energy products (ie. fuels) . For example, Canada pumps up to a couple of million bbls of oil a day into the US. But it's ability to refine such heavy crude is limited, so basically the US acts as a refining service and then sells back gasoline to Canada an average of 100k bbls a day.
so what is your point?
RZ, WHAT IS YOUR POINT BUDDY?
It doesn't matter. If they export a 1000 barrels of cheap oil to us and we send 50 barrels of gasoline and keep the rest they still are the net exporter. Canadian OIL exports are a huge industry. Canadian gasoline imports are not. Its not a 1 to 1 ratio.
We, the people, have become divided in our views of the economic, political and social issues surrounding us. This is not new or unusual. Our failure is our inability to come together to find common ground and choose a way forward. Washington gridlock epitomizes the problem but it is we, the people, who are the cause. We choose and elect candidates to office based on how much money they can collect and spend denigrating their opponents. We choose and elect candidates who promise never to compromise. We carve up electoral districts to disenfranchise our opponents. We choose Supreme Court Justices based on their political leanings rather than their qualifications. We, the people, who vote or not for those who hold office are responsible for things as they are today. As Pogo once opined; "We have met the enemy and they is us."
"We the people", what people, who is "we"?
The really funny part is where 'Europe' is assumed to be such a bad example. There is no way you would be able to attract large amount of European immigrants in any of the three scenarios (it is at 9% of the 1M immigrants/yr). Even if the Euro breaks down, how do you judge the attractivity of a country: -with stalemate politics, -lack of basic health insurance, -19th century gun laws, -a country that is banning scientific facts from curricula, -outrageous crime rates, -failing gated communities, -with a record 30,797 fatal traffic accidents (2009) and a rude police force?
Well put, Voltairasmus. The main problem here is the the M.I.C. (military-industrial-complex) now owns the majority in Congress and the White House today just as Pres. Dwight Eisenhower warned us about back in 1959! You also may have noticed how Barack Obama renegged on most of his 2008 promises after he became President, too!
As a pragmatic financial planner for almost 40 years, I've seen trends appear and disappear. I've seen the pendalum swing one way and then the other in spite of vigorous arguments that the end of the world as we know it is near. No matter how many times I thought the glass was half empty, it turned out to be half full. If pessimism is as described above, on a scale of 1 – 5, a 1, then put me in at #4. Go Gators!
Fact: The IMF and CNN will both be gone in the nexf five to ten years.
America must not continue draining its depleting resources. Stop all wars and unwarranted military interventions in foreign countries..
Cutting the war and military budgets will reduce US national fiscal deficits (debts) drastically. Its time to heal the financial wounds.
The next important vision is an America with well educated and highly trained people. The cowboy way of life is only for the retirees.
Another vision of an America is finding a cure for fossil fuel addiction.
Im sure somewhere out there, is another cleane source of energy. Maybe in the the sun or in the center of the earth. I always thought if we can run a super heat resistent pipe to the Sun's core, and have energy storage tanks in outer space to store this energy. There will be limitless energy for the next thousand years. And the sun dont have to flare anymore. A new patented industry will be born where thousands of spacetankers toing and froing these storage stations.
Dont have to be the sun though, how about the earth's core?
There are many great visions for America, but these have been distracted by free spendingd mojos in the White House in the last decade.
You can only print so much more money, but America cannot carry on printing more money to sell to the rest of the world – without leaving behind a major negative economic side effect, like hyper inflation , for the next generation of Americans. Government has to be made accountable for any national spending. And the people must approve it first.
The overspending and overeating ways of America stops: this is a greatest vision of all for USA..
" 64.1% or about 99.8 million American women are obese ... " (BBC http://www.bbc.co.uk/news/health-17585734)
Cutting down on overeating will help reduce America's national healthcare cost 10-20 years down the road.
The national healthcare cost would become unmanageable if the current greedy habits continue unstopped. More Americans are going to get diabetes and heart problems. And these are very expensive diseases to tackle.
Obesity or fattiness, is not only bad for the heart, it is equally bad for the head.
"Being overweight in later life puts you at higher risk of brain decline, Korean research suggests. "
"A study of 250 people aged between 60 and 70 found those with a high body mass index (BMI) and big waists scored more poorly in cognitive tests.
The Alzheimer's Society said the research, in the journal Age and Ageing, added to evidence that excess body fat can affect brain function.
Lifestyle changes can help make a difference, it said. " – BBC http://www.bbc.co.uk/news/health-17465404
America was a great country, and it can still be great. But only if you can teach some of these self serving politicians how not to destroy its greatness over time.
We all know that the Roman Empire was a completely different animal from the United States, right? These historical comparisons are seriously a gross over-simplification.
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