Monday, November 12, 2007

The Rufus Economic Report

Right now, times are tough for the American economy and some experts are already predicting the "worst recession since the 1930s." Is the prognosis really this gloomy? Your intrepid reporter visited an economic expert... okay, just kidding. My father-in-law is a CFO at Deloitte, which makes him sort of an über-accountant. So, I asked him what the economic future holds, in his professional opinion. Here's what he told me, in paraphrased form. If there's anything here that sounds completely wrong, blame it on my lousy memory, not him.

Basically, the world economy will face the following shortages in the future: oil, natural resources, food, and population. The US is uniquely fortunate in the last regard because the US population is not declining. There is a sort of zero-sum mentality that sees population growth as a strain, but it's also not particularly true. More workers means more production means a stronger economy.

Where the United States has trouble is in the sub-prime housing market and in the high amount of debt that the country has taken on. So, basically national debt and individual debt will make times tight in the near future. However, the weaker dollar is not necessarily a bad thing because the national debt is held in dollars and so is lessened. Also, a weaker dollar will spur American exports. In fact, I've seen just this happening; when I cross the borer into the US now, I often have to wait in a long line of Canadians traveling south of the border to go shopping. So, the weaker dollar is troubling, but not necessarily terrible.

Overall, he said, and this is quoted by memory, "The American economy is the strongest and most dynamic economy in the world, by a long shot. And it’s been one of the most dynamic in the world almost since the founding of the country. So, I wouldn’t place money on the idea that the US economy is going to collapse any time soon." Basically, we should expect tight times, but not catastrophe. So, now you know.

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