Not surprisingly, the recovery we have been seeing and hearing about is in many ways almost not at all a recovery–because it isn’t being felt by most Americans. Consider that real U.S. GDP has averaged about 3.2% annualized since the “bottom” in 2009, and consider that roughly 2% of that total is due to inventories, leaving just 1.2% to actual economic growth.
Recently, Gluskin Sheff economist David Rosenberg wrote that this is the worst GDP recovery, at least ex-inventory, on record. And, yet, we’ve done more than ever before in an effort to make it all happen.
To recap: We’ve been running a 10% deficit-to-GDP ratio, and managing soaring debt-to-GDP ratio. We’ve seen the Federal funds rate sit as close to zero as it can get, for as long as possible, helping drive mortgage rates to their lowest levels nearly ever. The Fed has tripled its balance sheet by purchasing mortgage securities, while the FHA has stepped in to offer the next generation of subprime loans to consumers. We’ve shifted the sands of our accounting rules to enable profit growth primarily in the financial sector. We’ve put incessant pressure on banks to modify non-performing loans. We’ve juiced car purchases and home purchases via tax incentives, too – all part of massive stimulus spending designed to get the economy working again.
All this, and we have only the worst recovery on record to show for it?
