Tags: us | economy | obama

The US Economy Will Find a Way

Monday, 12 Mar 2012 01:03 PM

The market has been on fire. The Dow Jones Industrial Average has soared 25 percent since last October. In fact, the index has almost doubled since the March 2009 lows in the depths of the financial crisis.

Many are quite skeptical of this market rally. And who could blame them?

After all, the country has massive problems.

On top of the list is the fact that we're broke.

We owe about $16 trillion. The pace at which the country is adding debt is staggering. The debt has increased by about 60 percent in just the last four years. That means we've accumulated more than a third of all the debt this country has acquired since the signing of the Declaration of Independence in just the past four years.

Editor's Note: Meltdown on Main Street Coming, Prepare Now

But things continue to get worse. More than a trillion dollars of new debt is being added every year. And this is just public debt. It doesn't include promises the government has made in future Social Security and healthcare payments. When these promises are included, this country is on the hook for an estimated $80 trillion to $100 trillion. By some estimates, Medicare (and Medicaid), Social Security and interest on debt will take up 90 percent of the Federal budget by the year 2025.

These numbers are of course "unsustainable." We need to balance the budget, get a handle on the existing debt and reform entitlements just to have a mathematical chance to avoid a financial collapse. But nothing is being done.

President Barack Obama has only offered up higher taxes on the rich to solve the problem. Even if all the taxes proposed were passed, the extra revenue would barely make a dent in the current problems. But the White House hasn't offered up any other solutions.

After more than three years in office, the president doesn't even have a coherent plan to remotely attempt to fix things. We're headed 100 mph toward a brick wall and he's simply just not going to do anything about it. And he might be re-elected.

Meanwhile, Europe is going down the tubes and the Middle East is becoming more unpredictable and dangerous. It seems at this point that we will either enter into yet another war we can't afford or the psychopathic cabal that took over in Iran in 1979 will soon be running around with nuclear weapons.

This is just a brief glimpse of the current problems. I could go on and on. But you get the idea.

So why is the market going higher?

Editor's Note: Meltdown on Main Street Coming, Prepare Now

One could reasonably point to the Fed's actions. The near zero interest rates have forced money into the market because there is no place else to earn a decent return. Others claim that investors are just foolish and haven't learned their lesson from the financial crisis.

But while low interest rates are certainly part of the reason, there is something else going on.

The U.S. economy is exceeding almost everyone's expectations. Despite massive uncertainties and excess regulations the economy has found a way to persevere. While things certainly aren't great, the performance of the U.S. economy under such tortured circumstances is quite laudable.

Corporations have adjusted to the post financial crisis world and earnings, for the most part, are better than ever. Consumer confidence is growing and unemployment is getting better.

The U.S. economy is a magnificent and resilient force that can find a way to succeed under almost any circumstances.

Capitalism is our own game and we play it better than anyone else. While emerging markets continue to grow, there is still no one that can hold a candle to the United States. Even despite the sheer magnitude of our current problems, the United States is still the best game in town.

This economy will still need large scale structural reforms to avoid catastrophe down the road. But the sheer resilience the economy has shown should give people a renewed sense of confidence that perhaps our problems can be overcome.

This economy is stronger than many think. The 21st century could well belong to the United States.

About the Author: Tom Hutchinson

Tom Hutchinson is a member of the Moneynews Financial Brain Trust. Click Here to read more of his articles. He is also the editor of The High Income Factor. Discover more by Clicking Here Now.

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Monday, 12 Mar 2012 01:03 PM
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