Despite record doses of monetary and fiscal support, the U.S. recovery appears to be stumbling. First-time claims for jobless benefits are on the rise and economic growth estimates for the April-June quarter have fallen to just over 1%. Many are now asking if we are on our way to a double-dip recession or even a Japanese-style "lost decade."
Let me propose two simple observations:
(1) Headed? We're already knee-deep into economic malaise that started in 2000. It's hard to recognize because media driven reality quotes all economic statistics and trends in U.S. dollars. Unfortunately, the U.S. dollar and other major fiat currencies are biased units of measure due to aggressive devaluation. I first talked about this bias in my commentary Dow 10,000 is meaningless. Back in February I suggested the following,
U.S. stocks are denominated in dollars per share. As the dollar continues to devalue, Dow 10,000 today will no longer be comparable. Comparing price levels denominated in debasing (devaluing) currency is like measuring distance from a yardstick that has a quarter inch removed each year. A yard measured today will be two and half inches shorter than one measured ten years ago.
Using similar logic, Dow 10,000 today is no longer comparable to Dow 10,000 of March 1999, because the dollar (yardstick) is not constant over time.
Nothing has changed today, except that the real economic trends have worsened since then.
(2) Lost Decade? When this one is finally recognized as sovereign debt crisis that was fought with currency devaluation, it will have encompassed for more than a decade. My cycle doesn’t suggest real, as opposed to a nominal or biased unit of measure, economic bottom in 2016.
Source: finance.yahoo.com
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