A roundup of economic news from around the Web.
- Bubbles: The Economist this week looks at bubbles. ” Investors tempted to take comfort from the fact that asset prices are still below their peaks would do well to remember that they may yet fall back a very long way. The Japanese stock market still trades at a quarter of the high it reached 20 years ago. The NASDAQ trades at half the level it reached during dotcom mania. Today the prices of many assets are being held up by unsustainable fiscal and monetary stimulus. Something has to give.”
- Damaged Retirement: On the Tax Policy Center’s TaxVox blog, Howard Gleckman looks at the extent of damage the market crash had on retirement security. ” In a new paper, TPCs Eric Toder, along with the Urban Institutes Karen Smith and Barbara Butrica, look at how investors would fare under three post-crash market scenarios. And what they found may surprise you a bit. Under one, your portfolio gets back to where it would have been, absent the crash, by 2017. That would take large, but not unprecedented, stock gains over the next decade. If equities merely revert to their historic annual returns from the markets December 2008 level, youll permanently remain far behind where you would have been if there had been no collapse. And if stocks respond as they did in the decade after the 1970s crashwell, you dont want to know.”
- Housing and Recovery: Dan Gross of Slate says that the economy will recover no matter what happens to the housing market. ” People! Wake up! It may be difficult to imagine, but we’re going to have to have this recovery and expansion without housing. In fact, we already are We’ve shown that we don’t need housing to produce growth. The U.S. economy has staged an extremely dramatic turnaround, from contracting at an annual rate of 6.4 percent to growing at a 2.2 percent rate in the third quarter. Macroeconomic Advisers says fourth-quarter growth is tracking at a 4.9 percent annual rate. If that proves true, the economy’s growth rate will have risen 11.3 percent in a nine-month periodan astonishing shift. And all this growth has occurred as house prices continued to fall and consumer lending declined. With apologies to Larry Kudlow, it’s the greatest story never told!”
Compiled by Phil Izzo