Thursday, August 26, 2010

Contrarian Viewpoints: The positive economic opinions

Since May of this year when the Greek debt scare coupled with woes of the Euro region rattled the world markets, most experts have been talking about a double dip in the developed world. In these constant forecasting of doom, two articles with a contrarian viewpoint on the editorial pages of yesterday's Wall Street Journal captured my attention. The editorial titled, "The Housing Mirage," reflects on the record fall in existing home sales in July (the drop was 27% as compared to a consensus forecast of 13% by Bloomberg). WSJ editors try to tell us that housing is an effect and not a cause of the recovery. So housing will not help not hinder recovery beyond a small measure. Of course they go on to critique the administration's policies to support housing, but that's a different discussion.

The other article, an opinion piece written by DeVol from the Milken institute points out that investment in equipment and software is strong along with the outlook for exports. The growing tigers of Asia and South America aren't relenting on their American imports yet. Referring to their study, "From Recession to Recovery, analyzing America's return to growth," based on, "extensive and dispassionate econometric analysis," the article predicts a GDP growth of 3.3% of 2010 and 3.7% in 2011. They argue that relationship between rate of recovery and peak to trough decline of GDP is well established historically. The opinion piece goes to give suggestions to what the administration should do to ensure and bolster the recovery.

The editorial is -The Housing Mirage. As of today the article can be read without any subscription. Same is true for other article, The Case for Economic Optimism

PS: Tried researching Milken Institute and found them described as non-partisan at most places.