ECONOMICS:The Long Global Boom
Wesbury, Brian S.
E C O N O M I C S The Long Global Boom by Brian S. Wesbury gy prices, terrorists, hurricanes, 17 Fed rate hikes, corporate scandal, and war. None of these things has created a recession....
...Horses can only run so far, and even Indy 500 race cars must come in to get gas...
...In addition, the Fed must not allow inflation to get out of control, nor tighten too far...
...The bottom line is that the global economy, and therefore the U.S., which stands to benefit incredibly from global growth, is looking good...
...Tax hikes, protectionism, government interference with the economy, bad monetary policy, or a combination of these, cause recessions...
...E C O N O M I C S The Long Global Boom by Brian S. Wesbury gy prices, terrorists, hurricanes, 17 Fed rate hikes, corporate scandal, and war...
...Even the Eurozone, an area encompassing 12 countries, has grown for 159 consecutive months—more than 13 years...
...J U L Y / A U G U S T 2 0 0 7 THE AMERICAN SPECTATOR 4 3...
...This idea that there is a natural life cycle to ecorienced ten full business cycles...
...And this new technology has a long way to run...
...Since November 1982, the economy has been in recession 5.5 percent of the time—the average recession has lasted just eight months, and the average recovery has been 93 months...
...The world is clearly in a sweet spot driven by much better economic policy, which has encouraged the development and proliferation of new technology...
...is today), nomic activity is easy to believe...
...They say experiencing its third long recovery in a row...
...American rates percent...
...Hundreds of milpolicies of less government and stable money rate is 26 percent, well belo NDTHISISEXACTLYWHATHASHAPPENED...
...But Europe is in the midst of a tax war because Ireland and east European nations slashed their tax rates...
...history, while the 1990s recovery was the longest on record...
...And it’s still early in the third leg of the Long Global Boom that started in the early 1980s...
...All of this leads to what I believe will be a continuation of the Long Boom in global growth...
...top rate of 35 lions, perhaps billions, of people have been lifted out of In order for the U.S...
...And the slowdown in economic growth due to a crack in the housing dom, which has not had a recession in 15 years...
...Taxes and inflation can kill prosperity...
...Comments from analysts, journalists, and politicians that suggest the U.S...
...Global inflation has remained low, which keeps interest rates down and price-to-earnings ratios up...
...Low inflation also provides more certainty for innovators and creators whose plans for the future require a stable unit of account...
...to remain competitive, tax poverty in China and India alone, as they move toward more freedom...
...The economy keeps growing, and is OU HEAR IT EVERY DAY...
...Since the end of World War II, the U.S...
...B R I A N S . W E S B U R Y market fuels the fire, because many think they can see these excesses so clearly in the real estate market...
...Flat tax systems have spread to 16 countries and appear to be headed to others...
...The driving force behind all this growth is low tax rates and stable monetary policy...
...The world is in the midst of a long global boom...
...of resources than sending an engineer on an 18-hour airplane flight, or shipping the next generation of machine on a trawler...
...Part of this is due to massive technological progress...
...With 99 percent left to be utilized, the world will change immensely in the years ahead...
...Now, France, Spain, Germany, and the UK are following suit and planning cuts in corporate tax cuts, especially on corporate income, will become necessary in short order...
...None of these things has created a recession...
...Sweden The New Era is less susceptible to recesItaly Spain USA sion because productivity acts as a shock absorber against exogenous events...
...Recoveries do not die of old age—they die because of policy mistakes...
...some forecasters start to get nervous...
...This can be seen very clearly in the U.S., where the economy has absorbed shots from high enerGlobal Economic Recoveries Recovery Began Jan 1992 Apr 1992 Apr 1992 Aug 1993 Nov 1993 Jan 1994 Dec 2001 184 Months 181 Months 181 Months 165 Months 162 Months 160 Months 42 THE AMERICAN SPECTATOR J U L Y / A U G U S T 2 0 0 7 Length...
...This combination of policies created stagflation, and between 1969 and 1982, the economy was in recession 32 percent of the time...
...A few more rate hikes that push the federal funds rate to 6 percent would be perfect...
...For many, this sounds like the 1990s all over again...
...For example, in the 1970s, tax rates were high, government spending and regulation were both growing rapidly, and monetary policy was too easy...
...As a result, when recoveries get 67 months old (about where the U.S...
...And new software that upgrades the capabilities of a machine can be downloaded from the Internet, a much more efficient use The launch of the euro—as a new currency—has also had a positive impact, as have more open borders between most European countries...
...Or Canada, Spain, and Sweden, which have grown without a recession for 181 months, 160 months, and 165 months, respectively...
...This virtually guarantees a continuation of the Long Boom in the EU . Already the average European corporate tax w the U.S...
...But this is just a forecast and has no basis except in historical context...
...Since November 1982, the economy has been in recession 5.5 percent of the time—the average recession has lasted just eight months, and the average recovery has been 93 months...
...The current recovery could last as least as long, or longer...
...More importantly, the 2003 tax rates must stay in place...
...A . have spread around the world...
...Keeping them in check is the best way to make certain prosperity spreads and recoveries last...
...On average, each recovery has lasted 57 months, while each recession has lasted ten months...
...The 1980s recovery was the third longest in U.S...
...The cost of putting up cell-phone towers pales in comparison to stringing copper wire across a country...
...But it also includes a global push toward more economic freedom that boosts the ability of human beings to lift living standards...
...economic recovery is “long in the tooth...
...Moreover, historical precedent suggests that recessions are inevitable...
...Brian S. Wesbury, The American Spectator’s economics editor, is chief economist at First Trust Advisors, L.P., in Lisle, Illinois...
...This is unusual, but there is an explanaNation Australia UK Canada tion...
...In fact, a growing chorus argues that the current How, then, can anyone explain the United Kingrecovery has created financial excesses, and that a recession may be needed to wash them away...
...It has been estimated that perhaps only 1 percent of the applications that can be hosted on the World Wide Web have been developed...
...Moreover, technology has made it much easier to launch an economy into the 21st century than it was to launch it into the 20th century...
...The average recovery was only 35 months long, and the average recession was slightly longer than 12 months...
...has expethat the good times just can’t last much longer...
...So many things in life, from seasons to tides, happen in cycles...
...Things changed following Reagan’s tax cuts and regulatory reform, and Volcker’s victory over inflation...
...And I suppose it could be if policies go off course as they did in the late 1990s...
...They claim that a surge in private equity and merger and acquisition activity is proof of this theory...
Vol. 40 • July 2007 • No. 6
