Although Professor Perry's optimism is heartening, the variables he points to as those "that really matter" are suspect.
Economics have for too long continued to use Gross Domestic Product as a measurement of how well the economy is doing. What GDP is a measurement of is simply the dollars spent by all sectors of society. Thus, as government spending increases, GDP increases, regardless of what the spending is for. A better measurement would be the depreciated value of all capital goods, which reflects real investment in goods production.
Professor Perry also fails to comment on the impact of having to service a $10 trillion and growing national debt. At a 5% rate of interest, our federal government must raise via taxation $500 billion annually just to pay interest to holders of these bonds.
On the consumer side of the equation, there is the stress associated with record levels of household debt. For those who have acquired housing in the last 5-6 years, monthly housing debt is at record levels (particularly for first-time homebuyers). And, local property taxes are escalating as state and federal revenue sharing have fallen.
As reported earlier this year, household savings is lower than at any time since the Great Depression. Moreover, the ability to carry this debt is dependent upon the income of two adults working full-time.
A key leading indicator of where we are in the business cycle is what is happening in land markets. Strangely, neither government agencies nor many economists monitor land markets very closely. A british economist, Fred Harrison, has researched the history of land market cycles going back several hundred years. The data he has published indicates a very consistent 18-year cycle that has peaked and is heading downward. Externalities (e.g., the extent to which holders of U.S. dollars will convert them into hard assets in the U.S.) will impact the depth and duration of the downturn. Real estate markets in much of the U.S. are already depressed, inventories of unsold new homes are at record highs in many markets, which means that employment and incomes in the real estate and financial services sectors are declining.
Posted on December 29 at 12:26 p.m.
Although Professor Perry's optimism is heartening, the variables he points to as those "that really matter" are suspect.
Economics have for too long continued to use Gross Domestic Product as a measurement of how well the economy is doing. What GDP is a measurement of is simply the dollars spent by all sectors of society. Thus, as government spending increases, GDP increases, regardless of what the spending is for. A better measurement would be the depreciated value of all capital goods, which reflects real investment in goods production.
Professor Perry also fails to comment on the impact of having to service a $10 trillion and growing national debt. At a 5% rate of interest, our federal government must raise via taxation $500 billion annually just to pay interest to holders of these bonds.
On the consumer side of the equation, there is the stress associated with record levels of household debt. For those who have acquired housing in the last 5-6 years, monthly housing debt is at record levels (particularly for first-time homebuyers). And, local property taxes are escalating as state and federal revenue sharing have fallen.
As reported earlier this year, household savings is lower than at any time since the Great Depression. Moreover, the ability to carry this debt is dependent upon the income of two adults working full-time.
A key leading indicator of where we are in the business cycle is what is happening in land markets. Strangely, neither government agencies nor many economists monitor land markets very closely. A british economist, Fred Harrison, has researched the history of land market cycles going back several hundred years. The data he has published indicates a very consistent 18-year cycle that has peaked and is heading downward. Externalities (e.g., the extent to which holders of U.S. dollars will convert them into hard assets in the U.S.) will impact the depth and duration of the downturn. Real estate markets in much of the U.S. are already depressed, inventories of unsold new homes are at record highs in many markets, which means that employment and incomes in the real estate and financial services sectors are declining.
Edward J. Dodson, Director
School of Cooperative Individualism
www.cooperativeindividualism.org