Here is a new fact of life: America’s economy is getting a little smaller. This “shrinkage” is likely to be a secular — as opposed to a cyclical — sets of changes.
Out goes the conspicuous consumption of the 1990s and 2000s . . . Lean and green is in; Grotesque and self-indulgent are out. Downsize that McMansion! Replace the SUV with something fuel efficient! Save instead of consume!
This is much more than a philosophical view — its what all of the economic data over the past year has been practically screaming.
In terms of actual data, here is what the new, leaner American economy looks like:
• Retail Stores: Have been hard hit; Many chains are filing bankruptcy (Circuit City, Linens ‘n Things Sharper Image, Steve & Barry’s Tweeter, Mervyn’s); The survivors (Starbucks, Macy’s, Sears, Office Depot) are closing stores — some, as many as 10-20% or more of exiting stores. Retail shopping will emerge from the recession with a much smaller footprint than before;
• Finance & Wall Street: The Street has been hard hit — look for much smaller revenue, with staff cuts of 25-35%. The safest players? Those with green P&Ls, and/or substantial assets under management. In employment peril? Everyone else.
• University Endowments: The intellectual engine of America’s brain trust has just taken an enormous hit to the frontal lobe: Harvard, Yale, Stanford, others are down -25% plus over the past 6 months alone. The big endowments fund Professorships, grants, student scholarships, pure research. The loss will be deeply felt over ensuing decades.
• Wages: US Wages have been punished by globailization, and have been stagnant over the past 10 years; Now, we are likely to see contractions in wages over the next 1-3 years;
• Media: Cirucaltion at major newspapers are falling; Its likely that 50% of print Newspapers will be gone (or web only) in 5 years; Will Fox Business channel, which launched just at the peak of the Stock market in 2007, manage to survive this onslaught? Less than even money.
• Pharmaceutical Industry: Huge R&D budget and staff cuts — 15 -20% — at several major pharmas (Pfizer’s huge research layoffs most recently) don’t bode well for new drug development and cures; Misallocated resources over the past decade, and lots of dead ends don’t help.
What is the sum total of all this? The US GDP will contract 4-6% 2008 Q4 – 2009 Q2; Down 1-3% for the second half 2009; And is possibly flat in 2010 –
Back in 2001, we had forecast the US Economy could hit $15 Trillion by 2010-11; That now gets pushed back to 2015-17 . . .
Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.