Monday, January 31, 2005

 

Two economic positives

Those who know me know that I am not optimistic about the US economy. The reasons are the economic bubbles first in the stock market and now in the real estate market. Bubbles are caused by a central bank that makes credit too easily available which inflates the price of a certain asset class beyond rational value. History is our only guide as to what will happen and financial bubbles have never ended well.

But there are a couple of articles I have read recently which are net positives for the US economy. First, concerns the available supply of oil and the fact that there are limits to the price of a barrel of oil and that known oil reserves will be enough to service the world far beyond what I would think would be our need for petroleum to power vehicles. Second, a clear eyed look at the Federal debt and the fact that it is not anywhere near as bad as people think. That is not to say that we can run $500 billion deficits for the next 10 or even 5 years but that $200 billion will barely move the debt-to-GDP ratio which stands at a manageable 38%.

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