The American economy is on the rise, but a
question that has loomed is how long can we hold onto this success? Well, one way we can attempt to find these
answers is to look at the damage that has already occurred to our economy (and
others). The Economist reported on data
and created the Proust Index, a measurement that factor in real wages and
unemployment, financial asset and property prices, and household wealth. The Proust Index shows how much time has been
lost in economic growth, and the results were not good. America holds the third worst position,
facing 10 years of lost time. In the
stock market itself, the S&P 500 hasn’t seen the levels currently since
2008, and the growth on average since the 1990’s is minimal. The article states that Greek stocks were
actually worth more in 1992 than today.
Yikes.
The
data provided by the Economist show that the value in people’s houses would be equivalent
to those in 2001. With these numbers,
what hope do we have to believe that we are truly climbing out of the Great
Recession?
One
perk can be seen in the growth rate the stock market has experienced over the
past year. In the past, there have been
some devastating hits to American and other stock markets. The Economist has provided a graph to show the
amount of time until recovery for 3 recessions, including our current predicament.
As
one may be able to see, stocks are looking better than previous scenarios; however,
this comparison shows that we may not necessarily be out of the woods quite yet. The market is quite unpredictable, and the
trends in the past show that even though there were promising climbs at points
in recovery, the effect of the business cycle (or attempts to prevent lowered
growth) may push the stock market down into a longer period of recovery.
I
believe that America has a lot of things going for it right now; however, I
still find a lack of stability in the long run for our country. While we may be able to reach the peak from
2007 in the S&P 500, we may find ourselves quickly dip down soon
after. When recessions hit countries,
the amount of damage economic growth becomes a number that is nearly impossible
to catch up to, and truly paints an image of the economy turning back the
clocks to redo the mistakes made along the way.
Reference:
“The Proust Index”. The Economist.
http://www.economist.com/node/21548255
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