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Surf’s Up !!


Deutsche Bank is a giant European bank, who also has a huge wealth management business in the United States.  Because of this European background, I try to follow their perspective on the U.S. economy.  Here is the latest:

1.  The U.S. economy is definitely gaining positive, sustainable momentum, albeit weak.
2.  The things that have been holding back economic growth are weak consumers, lack of credit, a housing overhang, state and local government retrenchment, and fiscal drag from the federal government.  All are improving and losing significance.
3.  Housing is unlikely to continue such rapid appreciation.  It is ahead of fundamentals at this point.
4.  While the rate of growth is decidedly positive, it will not be as rapid as past recoveries because “the economy’s potential output — determined by factors such as labor supply and productivity — may have been damaged by the trauma of recent years.”  In other words, it was a really severe recession — duh!
5.  The labor market is not as good as economic reports indicate.  There is no upward wage pressure.
6.  Inflation is not an issue – agreed . . . for now!
7.  Interest rates will not rise anytime soon, courtesy of Janet Yellen.

I don’t disagree with any of this, but I would only add the thought from the 1970 classic book on Future Shock that the rate of change continually increases.  This slightly rosy portrait of the U.S. economy can change quickly, especially if there is a derivatives blow-up or the velocity of money increases suddenly.

But, for now, the sun is shining, and I’m looking for my bathing suit . . .

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