No actually I don't. There is so much gov't intervention on the monetary side, and we have already had too many other fiscal interventions in the past and present for that too happen. Ofcourse that would depend on your definition of a collapse. I would ultimately prefer a major collapse in the context of market distortions being allowed to work their way through the system properly. Instead, when you have this massive intervention in markets, rather than get a major shock to the system...you get a slow grinding economic malaise which lasts for years. Which is exactly what we are in.
We have anemic GDP data expansion...even with the new gov't formula to inflate GDP. We have a labor market that has seen about 950k private sector jobs created year to date, but about 730k of them are part time employment. We have inflation in essential goods and services, and deflation risk everywhere else. And we have artificially low interest rates which taxes retiree's and slows the growth in the labor market, as it hurts labor market turnover and hurts younger workers entering the workforce. Basically they are so many distortions that we will more likely see a continued slow anemic pace. As my clients know full well, I predicted this back in late 2008. Inflated asset prices with little of the benefit passing onto the average citizen.
The shame of it is the overall fundamentals of the US economy are much improved. Corporate America has greatly de-leveraged and is sitting on record cash positions. I think there is a fair amount of pent up demand. Unfortunately, there is very little incentive to make capital expenditures. We have increased cap gain rates, massive new health care legislation that has 22k pages of regulations to abide by. And an overall hostile regulatory environment across many industries. Particularly the new Dodd-Frank legislation which makes it impossible to extend credit to even the people that should be getting it. Right now corporate America would rather sit on more than 2 trillion in cash at near zero percent, and guarantee a slow loss than take a risk of capital in such a punitive business environment. The policy responses have been all wrong. As I have said many times....we either rip the band aid off, or we peel it slowly. Either way the band aid has to come off. It should have been ripped off back in 2008.
If the government does not reign in spending and entitlements then the answer is an absolute YES.
by jerryl8 years ago
What's your opinion, and the reasoning behind it?
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