The Teflon Economy

This is an interesting article on how the US economy has managed to avoid falling off a cliff over the past decade. The question is: "how long can it last?" The answer seems to be: "for at least the next couple years."

"The ability of the U.S. economy to shrug off shock after shock in the last few years has been truly remarkable. Record high oil prices? Growth has barely slowed down. Iraq war? Postwar growth was the highest since the booming 1990s. Corporate scandals? U.S. companies are in the strongest financial shape they have been in decades. Terrorist attacks? The economy barely missed a beat. Biggest stock market crash since the 1930s? The ensuing recession was the mildest since the end of World War II. Too much debt and too little saving? The U.S. consumer has not noticed. A sharply lower dollar, gradually rising inflation, and a ballooning U.S. budget deficit? The bond market does not seem worried. And the list goes on."

"The amazing performance of the U.S. economy in the troubled half decade since the dawn of the new millennium is all the more remarkable given the very poor performances of both Japan and the Eurozone. Where the United States has rebounded, the other economies have faltered. In particular, during 2004, when the world economy enjoyed its strongest growth (4.1%) since 1988, the 1.8% growth of the Eurozone was very disappointing. At 2.6%, Japan's performance was somewhat better, but far short of the 4.4% growth in the United States. For 2005, Global Insight expects that both Japan and the Eurozone will grow at less than half the rate of the U.S. economy (i.e., 0.9% for Japan, 1.5% for the Eurozone, and 3.7% for the United States)."

Source: Global Insights