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December 09, 2005

MSNBC Notes Economy Is "Galloping"

But what's this? Listen closely for the dog that doesn't bark:

MUCH OF THAT STRENGTH, surprisingly enough, will be concentrated in the consumer sector, which has weathered the shocks of 2005. The GDP revisions show real consumer spending increased at an annual rate of 4.2% in the third quarter. That's better than the 3.9% pace previously estimated, and it occurred during a quarter when gasoline prices hit more than $3 per gallon.


One reason consumers may be willing to spend is because they are feeling more optimistic about the economy. The Conference Board's index of consumer confidence jumped to 98.9 in November from 85.2 in October. The nearly 14-point gain was the biggest increase in 2 1/2 years. The indexes covering current economic conditions and consumers' assessment for the next six months both rose sharply.

The board attributed the upbeat sentiments to a more than 40 cents drop in the price of a gallon of gas and better job growth. Fewer households rated jobs as "hard to get" in November. By the end of the month, regular gasoline had dropped to an average of $2.15 nationally, and it had dipped below $2 in some parts of the country.

BESIDES THE GAIN IN INCOME resulting from better job growth, households are also benefiting from the recent rally in the bond market....

Notice anything missing? Well, let's continue. You'll see it.


CONSUMERS AREN'T CARRYING this economy alone, though. Businesses are also contributing more to growth than they did in previous years. According to the new GDP data, inventories fell by the biggest amount since the 2001 recession. Rebuilding stockpiles will require more gains in production in coming months. And business investment in plant and equipment remains strong.

In particular, equipment outlays grew at a 10.8% rate in the third quarter, up from the original estimate of 8.9%. The pace could be even faster this quarter, based on the October rebound in capital-goods orders and shipments, after being depressed in September by the hurricanes and the strike at Boeing Co. (BA) Even excluding aircraft, equipment orders continue their steady uptrend.

Easy access to money, whether from good profits growth, abundant cash flow, or cheap borrowing costs, has enabled companies to boost their capital spending budgets....

So: Consumers and businesses are both spending more money.

Why should that be, I wonder? The article does mention several factors, each of which doubtless contributes to "extra bonus magic-dollars" floating around in the economy.

But it seems to miss one factor. It names each and every conceivable factor except this one.

Anyone? Anyone?


Anyone seen this before? The Laffer Curve. Anyone know what this says? It says that at this point on the revenue curve, you will get exactly the same amount of revenue as at this point. This is very controversial. Does anyone know what Vice President Bush called this in 1980? Anyone? Something-d-o-o economics. "Voodoo" economics.


Voodoo economics?


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posted by Ace at 01:47 AM

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