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U.S. Economic Outlook for 2006: The Doomsday Myth, the “Boomsday” Reality, and Forecasts and Predictions for the U.S. Economy
By Dr. Mark Skousen, Chairman, Investment U
Thursday, December 15, 2005: Issue #495
At the San Francisco Gold Show a few weeks ago, the final question on the closing bull and bear panel was, What is your U.S. economic outlook for 2006?
All of the panelists except me said the U.S. economy would be lower in 2006. One even suggested a collapse. Mind you, this is a gold bug conference, where doomsayers live and breathe.
I responded to the other panelists: “You’re crazy. Barring another major terrorist attack or unexpected crisis, the U.S. economy is likely to grow 3-4% next year.”
The U.S. Economic Outlook for 2006: In One Word…Booming
Funny, the very next day after the closing panel, the Commerce Department revised upward the third-quarter GDP growth rate from 3.8% to 4.3%. Bear in mind that this means this dramatic expansion occurred during the devastating Gulf Coast hurricanes in late summer!
This latest revision represents the fastest expansion in two years and the 10th consecutive quarter of growing averaging 4% in real terms on an annual basis. See the chart below, which is GDP growth in current dollars (the percentages are 3-4% in real terms).
The revised third-quarter GDP figures were strong across the board. Durable-goods orders increased at an annual rate of 10%. Gross private investment advanced 5.8%, and real equipment and software spending climbed nearly 12%. That’s especially good news in our 2006 economic predictionit proves that business, not consumers, is driving this economic recovery.
So much for doom-and-gloom economic forecasting
Responding to the report, The Wall Street Journal editorialized, “The U.S. economy can withstand natural disasters, rising interest rates, $70 oil, $4 gasoline – and the relentless pessimism of elite forecasters who said today’s prosperity could never happen.”
Ben Franklin Had Little Use for Complainers
Constant predictions of doom and gloom in a time of plenty reminds me of a comment founding father extraordinaire Ben Franklin made in 1785. I came across this profound observation when I was compiling and editing The Compleated Autobiography by Benjamin Franklin.
In his words…
I saw in the public papers of different states frequent complaints of hard times, deadness of trade, scarcity of money, &c. It is always in the power of a small number to make a great glamour. But let us take a cool view of the general state of our affairs, and perhaps the prospect will appear less gloomy than has been imagined.
In his original autobiography, Franklin told the story of an elderly man who repeatedly predicted economic depression and a real estate collapse in Philadelphia, and warned Franklin to sell his printing house. Franklin ignored his advice and prospered. Eventually, he said, “I had the pleasure of seeing my friend pay five times as much for one piece of land.”
Franklin died in 1790 at the glorious age of 84, leaving behind a fortune. (According to The Financial 100, Franklin is ranked as one of the 100 wealthiest Americans in history!) Why? Because he was an optimist in the early stages of the American economic miracle. He predicted, America will, with God’s blessing, become a great and happy country”The United States affords good laws, just and cheap government, with all the liberties, civil and religious, that reasonable men can wish for.”
In sum, I’m optimistic in my U.S. economic outlook. Don’t be surprised that by next year, the U.S. economy is still running on all cylinders, and the Dow is at all-time highs.
Good trading, AEIOU,
Mark
Today’s Investment U Cribsheet
- Editor’s Note: In Monday’s Investment U, Mark recalled his battle with The Wall Street Journal to publish gold prices on the front page “Summary of Markets” section. Last year, the Journal began doing just that with one of its editorial mentions on December 1 stating, “We think this gold boom represents an investor bet on future price increase.” Victory achieved! For Monday’s column, visit Investment U issue #494 – Gold: Inflation and Market Indicator: Where to Put Your Money When Prices Edge Higher.
- Ben Franklin wrote one of the most widely read autobiographies of all time, but unfortunately, he never finished it The Compleated Autobiography by Ben Franklin, which I compiled and edited in Franklin’s own words, fills in the last 33 – and most eventful – years of his life. And it is now available at Amazon for only $18.45.
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