Global Boom ?

Monday, April 09, 2007 | 10:30 AM

We've mentioned the Recency effect several times of late. You can see no better example of this cognitive bias than in David Malpass' WSJ editorial today, crowing over Friday's NFP data.

To his credit, Malpass at least tries to contextualize the release into some historical framework, looking at the drivers of the global boom over the past few years. IMO, he downplays what's significant and overemphasizes what is less significant, but give him credit for looking at the bigger picture.

Excerpt:

"The sea change in global conditions toward fuller employment has profound implications. This is an opportunity to build on success rather than dwell on U.S. recession odds. Developing countries could double their housing stock by adopting stable currencies and market-based banking systems, the building blocks for tapping into global liquidity and mortgage finance. Mexico, vital to U.S. immigration concerns and behind in global job creation, has the opportunity to take an economic leap forward, using today's plentiful liquidity to expand housing, raise living standards, and transform energy exploration and development. Brazil, India, Israel, South Africa and others could use part of their international reserves to reform their anti-growth tax systems, a step blocked until now by the fear that tax revenues from the existing system would decline before tax receipts from the new system replaced it.

What's driving the improvement in the global economic and labor environment? In the 1990s, the strong and strengthening dollar created a shortage of global capital and a crippling global deflation as the U.S. drew liquidity inward. U.S. big businesses, especially their stock prices, did well as global investors chased after "king" dollar, but most of the rest of the world sank. Europe was stagnant, while Asia suffered an extended deflation crisis.

But the post-9/11 switch in U.S. monetary policy injected liquidity into the global economy, lowered real interest rates, and brought the value of the dollar down, stopping deflation.

The 2003 tax cuts accelerated the expansion, adding profits, jobs and asset price gains. These two key growth steps -- reflation and the reduction in the marginal tax rates on labor and capital -- are largely ignored in economic headlines dominated by concerns about global imbalances and looming recessions. Meanwhile, the global economy is adding more to jobs, output, literacy and government tax receipts than ever in its history."







Source:
Global Boom
DAVID MALPASS
April 9, 2007; Page A13    
http://online.wsj.com/article/SB117607451984663549.html

Monday, April 09, 2007 | 10:30 AM | Permalink | Comments (42) | TrackBack (0)
de.li.cious add to de.li.cious | digg digg this! | technorati add to technorati | email email this post

bn-image

TrackBack

TrackBack URL for this entry:
https://www.typepad.com/services/trackback/6a00d8341c52a953ef00d834413c0a53ef

Listed below are links to weblogs that reference Global Boom ?:

Comments

I guess we don't have to surmize his political leanings as it's there in the last paragraph, first sentence of yor excerp.

Why can't these people see those for what they truly were?? Tax subsidies to the top 5%...
The last paragraph should just be a political ad for any republican running...all they have to do is cut and paste that into a current "speech"..

Ciao
MS

Posted by: michaelmschumacher | Apr 9, 2007 10:37:28 AM

The comments to this entry are closed.



Recent Posts

December 2008
Sun Mon Tue Wed Thu Fri Sat
  1 2 3 4 5 6
7 8 9 10 11 12 13
14 15 16 17 18 19 20
21 22 23 24 25 26 27
28 29 30 31      

Archives

Complete Archives List

Blogroll

Blogroll

Category Cloud

On the Nightstand

On the Nightstand

 Subscribe in a reader

Get The Big Picture!
Enter your email address:


Read our privacy policy

Essays & Effluvia

The Apprenticed Investor

Apprenticed Investor

About Me

About Me
email me

Favorite Posts

Tools and Feeds

AddThis Social Bookmark Button

Add to Google Reader or Homepage

Subscribe to The Big Picture

Powered by FeedBurner

Add to Technorati Favorites

FeedBurner


My Wishlist

Worth Perusing

Worth Perusing

mp3s Spinning

MP3s Spinning

My Photo

Disclaimer

Disclaimer

Odds & Ends

Site by Moxie Design Studios™

FeedBurner