May 23, 2019

The Myth of the Booming Economy

“The US economy grew a surprisingly strong 3.2% in this year’s first quarter, according to the latest real GDP estimate from the Bureau of Economic Analysis (BEA). This was about a percentage point more than expected by the consensus of economists who track this number. While a surprise, global investors didn’t seem to care. Stock prices and interest rates hardly budged on the data. Why?

The main message in the first-quarter gain is that worries about an imminent recession, widespread just a few weeks ago, were overdone. The economic expansion that followed the Great Recession remains in place and is on track to celebrate its 10th birthday in June. A month after that, it could become the longest expansion in US economic history. The previous record holder, the 1990s expansion, was fueled by business adoption of the internet — Amazon opened for business as an online bookseller in July 1994.

The current expansion is often thought of as weaker than those of the past, but this is largely why it has gone on for so long. Booms usually end because of runaway inflation, stock market and housing bubbles, or over-borrowing and mountains of debt. The 1990s expansion ended with the bursting internet stock market bubble. Remember”

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