Putting aside the fact that conventional wisdom on the economy has generally been pessimistic for four years running; putting aside the competition among media commentators and journalists to be the first to call the next financial meltdown; and putting aside ideological trading patterns and media commentary designed to talk down the economy until the November election so as to hurt President Obama's re-election chances -- the facts show a solid case that the U.S. is now the best-positioned large scale economy in the world just now.
Almost all commentators and journalists, of course, missed calling the 2007-2009 "Great Recession" much less the housing market and housing finance collapse that triggered it, so it's understandable that they would have bias toward predicting the next meltdown. And over the past three spring trading seasons we have heard plenty of worst case scenarios promoted as base case scenarios in order to qualify for the Cassandra Sweepstakes on cable TV.
Greece was going to leave the Euro and have a disorderly default; Germany was going to get fed up and go back to the Deutschmark; the euro itself was going to fall in value to arithmetic parity with the U.S. dollar (it still stands at about 1.31 as this is written); then the U.S. was going to default; now its Spain, Italy, France!
And of late we heard aggregate Standard & Poor's 500 stocks for the most recent quarter were going to come in at only a one percent rise or even less, with a some predicting a downturn (thus far into reporting season, they are already up four percent and rising.).
We can forgive just trying to be the next journalist to land a big book contract for pinpointing the next market crash; what is unforgivable is the willful ignorance of cable network editors and anchors. They should know that a lot of these negative sentiments are coming from hedge-fund and other investors who missed the surprise first quarter rally in stocks and are trying to catch up by shorting the market down so they can buy in cheaper after earnings come in. They keep putting on the same old pessimists, without asking them to explain their miss-calls in 2009, 2010 and 2011.
Some of these commentators also cite the notion that the U.S. is having a sub-par recovery because we have been showing only one to three percent GDP growth, compared with growth of three to four percent at this point in time after past recessions; but they ignore the fact that prior recessions typically showed GDP drops of only around three percent, while the Great Recession took us down five percent in GDP. A climb back from a negative five percent to a positive two percent is indeed and even more robust recovery than a rebound of up three percent after down three percent! Big lies work by repetition.
U.S. investors are now so skittish that canny hedge fund traders can now manipulate the U.S. stock market into a swoon simply by investing relatively few dollars bidding up the cost of credit default swap insurance contracts of Spanish bank debt (thereby causing rates on Spanish government bonds to move up and the Euro to slump down). By thus moving shares out of "weak hands" scared by the now annual rites of springtime disaster scenarios, these hedgies can buy in cheap and wait for stocks to rally again as they have each of the last three years.
Of course, there are real problems in Europe, which is in a recession that will hurt the returns of many U.S. multinationals, but in aggregate, will only dent GDP growth even if every export dollar relating to Europe went away. And we know China is slowing down; Brazil is in a funk and its central bank is fast cutting rates to re-stimulate the economy; India has political discord and corruption scandals; and Russia is learning to live with Putin again (as if he ever left). And lets not even mention the Mideast as we wait for a resolution of the Iranian nuclear issue that will please nobody but perhaps keep us out of war and the price of oil under enough control to keep gas prices within reason.
But all these facts really convey the sense the U.S. is in the best shape going forward of any of these other economies, is experiencing a modest resurgence now that domestic manufacturing has saved and strengthened its domestic auto industry, has the healthiest banking system in the world, has several airlines that are making profits, is growing again in Silicon Valley and similar high-tech environments around the country, and has a stock market (and 401 (k)'s) much higher than in Q1 2009.
In short, we have a chance to have an "American decade" economically. All we are missing is a little optimism -- well, OK, a lot of optimism, and lot more skepticism about the folks peddling pessimism as if it were the new true religion.