New Normal Becomes Old Normal as Exports Propel U.S. Recovery

The “new mix” is out to topple the “new normal” as the paradigm for America’s economic future

The 5.9 percent annualized surge in fourth-quarter growth -- the fastest since 2003 -- was powered more by exports and business investment than the traditional drivers of consumption and housing. This new mix of demand will boost the economy by 3.7 percent in 2010 and pave the way for 3.5 percent annual average increases thereafter, said Joseph Carson, an economist at AllianceBernstein in New York, who coined the phrase.

Talk is cheap. Long-term export growth must be lead by investment rather than devaluation. A breakdown of GDP reveals that domestic private investment, though bouncing from extremely depressed levels in the fourth quarter, remains firmly entrenched within a secular down trend. The new normal of currency devaluation, coined beggar thy neighbor policies in the second Great Depression, fosters only temporary allocation shifts or the size of the slice within economic pie representing the global economy. It does little to grow the size of the pie for everyone.

Source: bloomberg.com