Posted by: Opey | April 27, 2007

The Sky’s the Limit . . . And Falling

Fully recognizing that my audience is mostly college students that have no real interest in the economy beyond a few key items, I will preface today’s post with a warning. WARNING: ECONOMIC CONTENT AHEAD There that ought to do it. Ok, so GDP numbers were released today and they showed growth at only 1.3%, below the forecast rate of 1.8%. To put this in perspective, many economists agree that about 3% growth is the natural rate of GDP growth for a given term. Needless to say, this slowdown is big news. People are pointing to a plethora of reasons for this dip. Many economists have said the housing slump is to blame. There is also the issue rising inflation, mostly driven by the rise in energy prices, specifically oil which, as I type this, sits at $65.37 per gallon. GDP is adjusted for inflation so rising prices lead to declines in growth. Ok, so what does this news mean, beyond the obvious “were slowing down” message. I believe, and this is an opinion from someone only approaching a BS in economics (in three weeks that journey will be over, thank God), that it is a sign of weakening US competitiveness with respect to foreign competition. This GDP news comes on the back end of a report that the US dollar has hit an all time low against the Euro. It’s no secret that US jobs have been moving overseas and that we have lost a lot of our economic power over the past few decades. This news, coupled with other indicators, just makes that more concrete. We are no longer in a position to run the show. Our situation is now dictated more and more by outside forces, such as oil and the EU. We have been forced into slow growth by a lack of opportunities for domestic industrial growth and innovation. In my opinion, a dramatic shift in US economic policy to stimulate economic growth and innovation needs to occur in order to turn this ship around. That responsibility will probably fall on the shoulders of the next president, so vote wisely in the coming primaries/election.

Quote o’ the Day:

“First rule of Economics 101: our desires are insatiable. Second rule: we can stomach only three Big Macs at a time.” – Doug Horton

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