The Impending Diseconomy

Jerome sums up the bulls' arguments very well:

The logic is as follows:

• your arguments are rational and make a lot of sense, it's worrying
  
• but US growth and unemployment are doing great!
  
• therefore all is fine, and your points are not valid

  and the kicker:

• we're in a new kind of economy: financial markets are behaving differently, and the US economy is in a new kind of phase.

  sometimes accompanied by the grand finale

• with your stagnant economies, high unemployment and Muslim rioting, you'd better be happy that the US economy is growing, we're pulling you and it would be even worse if it stopped (and you'd better be grateful that we are waging war on the infidels for you, also).

The most extravagant example of the above kind of thinking has been the new theory of "dark matter" to explain away the fact that the US still earned, until recently, net positive income on its international investments, despite having become a net debtor to the world.

I could not agree more. I have been saying for a while that the current U.S. economy is a diseconomy - it is unreasonable and unsustainable. The world is not going to continue to finance U.S. debt forever and ever - it has to end at some point, and when it does, the U.S. economy will begin to contract. Big business might pull out decently; it usually manages to, but those numbers do not tell the story of how average people are finding themselves in worse and worse situations. Optimism is comforting, but never at the expense of reality.

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