What would a world with no money be like?

 

Image attribution: Frank Kovalchek; CC BY-S.A. 2.0 

By Paula Whately

“Money, so they say, is the root of all evil today,” sang Pink Floyd’s Dave Gilmour back in 1973. Little did the Ancient Mesopotamians know when they introduced the idea of currency to the world around 5,000 years ago that their revolutionary idea would go on to transform the planet in such a profound way. What’s more, given what humankind has achieved by moving massive amounts of money around – the scientific discoveries, the medical advances, the mind-blowing technological developments – it kind of seems a bit ungrateful to those Assyrian and Babylonian pioneers of old to suggest that maybe we’d be better off without money, and that it’s time to start imagining a future where goods and services are exchanged in a different way.

In a world dominated by competition for resources and defined by massive economic inequality, it’s certainly appealing to think there might be a better way of doing things and that hunger and poverty might one day become things of the past. But thinking about how an alternative economic system would work in practice isn’t that simple.

A New World economy

Maybe they got it right in Star Trek, where the good old United Federation of Planets began shifting to a ‘New World Economy’ in the 22nd century, money becomes an outmoded concept and Fort Knox is turned into a museum of the primitive capitalist ways of the society of old. But this New World Economy was only possible in Star Trek because they had, in their Replicators, a technology for synthesising whatever material goods they need. Whether you’re a lowly warp drive engineer or a high-ranking Starfleet diplomat, you have equal access to food, clothes and novelty key rings. Additionally, automation has become so widespread that there is no longer any need to pay for labour. That leaves citizens free to focus on bettering themselves and improving the lot of their fellow humans, instead of worrying about the relentless accumulation of wealth.

With the advent of 3D printing, replicator-style technology might not be as far away as we thought, but for now it’s fair to say we can’t really compare our current society to the inter-planetary civilisation imagined in Star Trek. But that certainly hasn’t stopped figures at the very highest level from thinking about and discussing what the world might be like without money as we know it today.

A barter economy

Sir Mervyn King (Governor of the Bank of England and possible Trekkie) has said that there is “no reason” that producers and consumers couldn’t exchange products and services directly through “essentially a massive barter economy.” According to King, “all it requires is some commonly used unit of account and adequate computing power to make sure all transactions could be settled immediately. People would pay each other electronically, without the payment being routed through anything that we would currently recognize as a bank. Central banks in their present form would no longer exist – nor would money.”

So we just need to come up with a unit of value and then figure out exchange rates for every single one of the trillions of different products and services that people might want to exchange? Cool. I’m sure someone could make an app for that. But is it simply the question of computing power that stands in the way of a transition to a barter economy?

Not according to ex-Microsoft engineer Balaji Viswanathan, who points out what he describes as the ‘indivisibility problem’; imagine you sold all your mushrooms for a pair of socks, and then decided you wanted to buy some bread. Would you be able to split the pair of socks in order to get the bread? No, you wouldn’t, you hippy fool! What were you thinking swapping all those lovely mushrooms for a rubbish pair of socks? Other criticisms include the problem with individuals storing wealth for use in future transactions (as many of the products being exchanged will be perishable, meaning they don’t necessarily retain their value over time), and the fact that there’s no easy way of arranging unsecured or secured loans of other forms of credit.

Collaborative consumption

As things stand, it’s hard to see how the world would function without conventional currency, but that doesn’t mean you can’t start doing some small scale bartering in your own day to day life. Are you awesome at baking? Then why not offer to bake a delicious cake for the landlord at your local pub in exchange for a few pints of the good stuff? Do you have a skill that people value? Then see what they can offer you in return for your time and expertise. Just ‘cause you have a job and occasionally shop at Tesco doesn’t mean you have to be a total slave to money; people are definitely embracing the idea of bartering, skill-swapping, and what Rachel Botsman calls ‘collaborative consumption’, so now’s the time to get in on the action.

About the author: Paula Whately is a freelance writer who has been writing about financial issues such as secured loans and credit ever since the recession began.

How the economy and casinos are similar

 Image attribution: Mattbuck; CC BY-SA 3.0

Not all businesses are a perfect microcosm of the larger economy, but in the case of casinos there are some interesting similarities between the two. People are the key driver of commercial activity and are subject to how the economy is administered. If casinos are considered risky places to put money, and the economy has attributes that are the same as casinos, then is economics not like a game at a casino? And is participation in that game more like gambling? The following illustrates just how the economy and casinos are correlated.

Advantage

Casinos are known to have what is referred to as a “house advantage”. This essentially means no matter what the odds on a particular game, they are stacked in favor of the casino in one way or another. For example, the green “0” and “00” on a roulette wheel skew the odds on a red or black bet in favor of the house. To make matters more complicated for the game players, table limits and bet minimums make it more difficult to implement betting strategies such as the “martingale”. The economy also has a house advantage in the sense that owners, employees, government and institutions collectively administer and operate it to their advantage at the expense of less fortunate, or more giving participants.

Uncertainty

Another similarity between the economy and casinos is uncertainty. Both gambling in casinos and participation in the economy involve a certain amount of opportunity risk. Without this element of risk, less or no opportunity to gain wealth would exist, but with it, the potential for exploitation is evident. Both the economy and casinos incorporate varying levels of risk that aren't all that far apart. There are no guarantees in either the economy or at the casino. Those whose skill sets are not commercially viable, and those who are disadvantaged by traits, beliefs and practices that jeopardize their functionality within the corporate structure face higher economic uncertainty.

Manipulation

No one is forced to gamble just like no one is forced to partake in an economy. However, there are certain elements of manipulation that make it difficult not to do either. In a casino, the exits are not clearly marked, there are no clocks, and free drinks and other perks entice patrons to spend the money they have not lost yet. In the economy, the only exit for those who have no money is the street and the advantages of participation include survival, the potential for wealth and an opportunity for happiness. In both cases, it is not unreasonable to say participants are taken advantage of via manipulation of needs and wants.

Employment

Both casinos and the economy are operated by employers and employees. In order to involve oneself in either, an agreement of complicity and compliance is understated. These contracts between employer and employee grant employees access to the benefits of participation in the economy, and in accordance of the rules of the games, business and regulations. Employment is therefore a necessary factor in the successful operation of both an economy and casinos. Furthermore, employment laws that favor a macro-economic commercial viability are quantitatively good for the greater economy because they tend to enrich corporations and their owners, and not necessarily all employees and participants.

Commerce

Commerce is essential in our economy, it is the lifeblood and engine of public administration. Without an economy driven by commerce, the economy would be driven by something else. In ancient Egypt it was agriculture and the institution of the Pharaohs, in pre-constitutional Kingdoms it was the will and direction of royalty, and in modern day, commerce serves the same purpose. Casinos are also highly commercial entities, they are fueled by the inflow of their customers' money, without which they would lose profitability and potentially face bankruptcy. Simply put, both the economy and casinos rely on the principles of commerce to operate either functionally or dysfunctionally.

How will Obama's re-election affect the finance industry?

 

The whole of the US waited with baited breath to hear the results of the election, perhaps none more so than financial sector workers. The election results have a dramatic effect on the markets, both immediately and long term. Promises made by government affect possible future performance of different market sectors. The news of Obama’s re-election potentially means many different things to different sectors of the market. The financial industry will be affected not only by changes to its own regulations but also by stock and share price fluctuations due to the addition or withdrawal of government support.

The finance industry

Barack Obama has said that he wishes to more strictly implement financial reforms in the Dodd-Frank Act than before, which will impact on insurers and investment banks which may have been getting away with more than they should. The profits of private equity firms may find their profits plummet as currently favourable tax policies for dividends and capital gains are likely to change. Traders dumped stocks in banks as they realised that Obama’s promised regulatory changes would prove costly to implement. The Dow-Jones industrial average plummeted by 369 points within the first two hours of trading on Wednesday, around 2.8%.

Healthcare

 

The phased implementation of Obama’s Affordable Care Act will benefit millions of US citizens. It has also already had an effect on the financial markets. Following the election results, on Wednesday hospital share prices rose across the board. Healthcare stocks overall traded around 1.4% down but the majority of the loss was in insurers’ share prices. Community Health Systems share prices rose by 6%, Bloomberg Industries hospital stock by 6.1% and HCA and Tenet Healthcare prices went up a huge 9.5% over the course of just that one day.

 

Energy/chemical companies

While renewable energy companies will be well backed by the Democratic government, other power suppliers saw stock prices plummet as traders dumped stock following the election. Obama’s promise to bring in more strict regulations to the energy industry as well as finance saw stock prices fall as everyone scrambled to rid themselves of burdensome stock in a hurry. The Obama cabinet are unlikely to invest in coal and it looks likely that the US coal industry will become more or less obsolete in a very short space of time. Obama is extremely keen to replace fossil fuels with renewable energy sources as widely as possible.

Attached Images:

•  License: Creative Commons image source 
•  License: Creative Commons image source 
•  License: Creative Commons image source 

This post was written on behalf of www.schemeserve.com – who have extensive knowledge about Lloyds insurance software and other financial services.
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How Emerging Markets Differ Economically From Developed Economies

 Developed vs Emerging Market Economies

Image attribution: AlexCovarrubias; public domain

Emerging markets characterize nation-states that are rising out of economic underdevelopment into a market based economy. These markets are still in the earlier phases of the industrial growth cycle in the sense they have large potential for systemic growth as measured by economic statistics. In other words, nation-states are developed to the point of self-sustainable growth but have not reached their full, or near full economic capacity. Economic capacity is the potential of an economy to produce, productively engage a work force, and make efficient use of economic resources in a profitable way. 

Market economy

Emergence from a developing nation to a growing market economy is a key attribute of an emerging market. This distinction between developing nation and emerging market is made by Vladimir Kvint in a Forbes report discussing emerging markets. Specifically, Kvint says a developing country is characterized by a strong need for economic assistance in the form of basic commodities needed to sustain a population whereas emerging markets have developed resources beyond this point. This is echoed in a report from the World Bank and cited by the U.S. Department of Agriculture.

Population demographics

According to Ashoka Mody of the International Monetary Fund (IMF), an emerging market is also characterized by changes in its demographic statistics. For example, Mody suggests an emerging market economy will have telling increases in fertility rates, education and life expectancy. These demographic categories represent advancements in wealth and health care. Additional demographics that may align themselves with emerging markets are higher employment and per capital income.

Economic policy

Since emerging markets are 'emerging' out of either undeveloped statehood or non-market economies, changes to government policy are also likely to be simultaneously indicative of changes to a state's economic status. This characteristic of emerging markets is highlighted by Ashoka Mody  and also  Chuan Li of the University of Iowa Center for International Finance  and Development. According to Li, changes in governance within emerging markets are aimed at transitioning away from overly interventionist policies, and avoiding corruption that can inhibit development of a free market.

Statistical metrics

There are a number of economic statistics that if measured correctly, are characteristic of an emerging market. Some of these statistical metrics include Gross Domestic Product (GDP), trade balance, government spending, tax receipts, and manufacturing activity among several others. These types of statistics are different from demographic statistics because they are representative of an economy and more derivative of demographics which directly measure changes to the population in an emerging market.

So having defined some of the characteristics of emerging markets what are some examples that meet all the above criteria? One place to look is an emerging market index that measures growth across a variety of economic sectors in multiple emerging markets. Moreover, this type of index is designed to measure business growth, a key characteristic of emerging markets.

Emerging and Growth Leading Economies (EAGLES)

 Image attribution: Pawel; CC BY-SA 3.0

The MSCI Emerging Markets Index includes Brazil, Chile, China, Columbia, Egypt, Hungary, Morocco and India among its emerging markets. Some of these economies such as China and Brazil are already quite large and may seem beyond the status of emerging. Yet what distinguishes these large growing economies from fully matured developed economies are the pace of growth, the speed at which structural change takes place and the potential to significantly increase economic capacity.

Why Financial Optimism is Irrational

Image attribution: Kromkrathog; standard royalty free license

Optimism is a great thing and fuels powerful inspirations to achieve, accomplish and perform. However, it is undeniable optimism is also based on varying levels of hope or unproven belief about the future. That is a very unscientific and logically invalid reason to pursue certain courses of action or perhaps just an unwillingness or inability to face the truth.

According to Time Magazine, realists who saw problems in financial management were "culled as negative people", but they were right. Even so, everyday financial optimism makes itself evident in the lives of millions of people who sincerely believe they will succeed in life's pursuits, but sometimes they just end up being the basis for the  success of others, if not undue victims of ill gotten gains.

To illustrate the irrationality of financial optimism, how many times do individuals, corporate executives, managers and politicians secretly cross their fingers after making a decision, making a public announcement or encouraging employees? Given the motive of corporations, it makes some sense to lie to employees, but that does not make it rationally sound, just cleverly manipulative. The Onion makes this clear in a humorous way. So what good is realism in a workplace where blind optimism is so much better for productivity, revenue and earnings per share? 

Image attribution: Teerapun; standard royalty free license

For financial optimism to be at least somewhat rational it is often justified by principles such as hard work, education, competition, and "proven methods". After all, there is substantial evidence that people who do work hard achieve things in this world. Literally millions of people are living their dreams quite happily and many of them achieved those dreams with hard work. Moreover, according to Saurage Marketing Research the number of American families with net worth's over $1 million is expected to double by 2020. Take a closer a look though. 

• $1 million will be worth less in 2020 due to inflation
• Nine reds on a roulette wheel do not guarantee black the next spin
• 33-69% of small businesses fail per CNN Money and Dunn & Bradstreet
• Persons aged 35 have an 18% probability of death prior to age 65 
• Nearly 25% of Americans have no net worth per the Economic Policy Institute

The list goes on and for hard work to pay off, the conditions have to be right. For example, hard work in the Soviet Union would earn one not a penny more than the next person. Hard work also doesn't pay off when shoveling a mud slide during a rain storm. In other words, there has to be a functional economy for financial optimism to have a sound rational basis. Moreover, if companies aren't getting rich enough in the wealthiest country in the world, what exactly does it take for them to start hiring people? Perhaps they are the ones who need to reassess things the way they are.

Today the U.S. economy is functionally challenged. Recent Bureau of Labor Statistics data shows 14.5% of the U.S. workforce is barely making enough to live on, if that, given the cost of living within the U.S. The labor force participation rate has also reached near 30 year lows per the BLS.  It could be a lot worse, but it seems things are going to have to change if financial optimism is to have a substantially higher basis in economic reality. Let's hope that it does!

Why Economic Bubbles are Good for GDP

Economic bubbles are considered bad because they run up asset values without an underlying rise in production or real value. Bubbles have occurred several times in recent history, the tech bubble of the 1990s, and the housing bubble of the 2000s being two examples. Since bubbles are artificially inspired by market sentiment, and/or monetary policy they naturally burst to become more realistically priced. These bursts have tended to be dramatic and cause substantial financial stress to unprepared individuals and entities. 

Despite the negative effects of bubbles they are also economic opportunities. Bubbles attract investment capital from foreign countries, create wealth and fuel investments spawned by the increase in asset values. Without bubbles, financial and economic stasis would be more likely, and although that is more stable, it is can also have less near-term economic benefit. For example, consider an economy without asset inflation, and with GDP growth that remains steady at 1-2%, and that occasionally rises above inflation. Such an economy only keeps up with population growth and does necessarily increase or decrease in size.

A bubble economy however, may grow 3-5% for several years straight. Moreover, according to Department of Commerce GDP data, U.S. GDP grew an average of 3.82% each year between 1992-2000. That is year over year data as well meaning 3.82% compounded over the previous year's growth. Although in the 1990s the bubble was actually based in real technological innovation, a reasonable interest rate environment existed and inflation was actually kept in check by tightening the creation of U.S. currency per the CATO Institute. This bubble was conceivably caused by over-exuberant investors rather than loose monetary policy.

Even after the tech bubble had burst annual GDP did not decline below 1%, a relatively small price to pay for a bubble that created a lot of jobs, attracted a lot of foreign capital, and generated a lot of revenue. The housing bubble was not as healthy and was fueled by inaccurate derivatives valuations, loose lending policies, and a surge of speculative real estate purchases and construction.  Interest rates were also much lower in the mid-2000s than the 1990s. Yet this led to a four year average GDP growth of 2.95%, low unemployment and large corporate, foreign and individual investments. Without this bubble, economic growth may have only averaged 1-2%, and a recession still might have occurred afterward.

The growth created by asset bubbles serves as a stimulus for economic expansion, and expansion that may otherwise be impossible to attain with more practical, but stable economic policies. As with large companies, developed countries with large economies like the U.S. have to grow GDP in the hundreds of billions to expand at a rate that can support and substantiate significant capital investment into industrial research, business development, and government sponsored programs. The need for economic bubbles suggests it is quite possible the U.S. has reached its economic apex where continued economic expansion at a consistent rate higher than 1% is difficult, unsustainable and unfounded.

Financial News 02/20/2012: Fiscal and Monetary Economic Centralization On The Rise

A trend of fiscal and monetary centralization seems to be rebuffing capitalist ideals for an economic heel digging. As Western nations deleverage private assets, governments are doing the opposite by leveraging monetary and fiscal policies. Central bank bailouts, and easing of monetary policy have been in fashion across the world. A look at the balance sheets of central banks, and the global debt map published by the Economist should make this clear enough.

The expense of all this money bathing is credibility. How much money can governments print, and how many sovereign bonds can be restructured at the expense of private bondholders before businesses and investors doubt the effectiveness or benefits of such policy? The more money that flows, the higher the equities climb. Higher 401(k) balances are more appealing than lower inflation and systemic fiscal functionality, and placing Southern Europeans in financial rehabilitation will be good for Europe even if it comes at the expense of nationality.

The economic debate about such policies exists, but traditional mainstream economics is not the approach of choice per Dylan Matthews of the Washington Post. Moreover, according to Matthews a good number of influential economists either support aggressive fiscal or monetary policy or both. Anything can be rationalized with sound reasoning, that does not make it valid logic however. In the case of economic policy, all this spending could be an echo of Reaganomics where outspending competition leads to advantages. Problem is that is a tactic not a strategy.

• Reuters: Corporate earnings reports less than spectacular
• Bloomberg: Oil price rises as Iran cuts off exports to U.K, France 
• WP: Government and employers penalize military reservists seeking work
• NCPPHE: American wealth to decline based on current education trends
• DOL: Advanced manufacturing growing, but labor is scarce per WP
• OECD: Q4, 2011 GDP in OECD Area declined .1%
• IBI: China seeks to boost lending by lowering bank reserves to 20.5%
• UK Guardian: Hundreds of thousands protest spending cuts in Spain

Market, economic and financial commentary for the business week ending 10/14/2011

Stocks rallied for a second week erasing losses. The Dow Jones Industrial Average (^DJI) has almost risen 1000 points or approximately 9.4 percent from its 10/3/2011 low. The reason(s)? Some of the statistical economic data such as September retail sales has been positive and Euro-zone sovereign nations have collectively voted to increase their European Financial Stability Facility (EFSF) to  €440 billion or $610.89 billion to help keep banking solvency and national debt under control. 

There are also short-term trading aspects to the market that can either be ignored or not depending on if one is investing long-term or not. The short-term technical patterns i.e. the way the DJIA line moves up and down quite possibly indicated a slow down in the momentum of rate of change thereby signaling purchases. In other words, less and less people might have began selling when the DJIA approached 10,655 which served as reason to lock in profits from selling-short i.e. buying stocks at an out of the money price to sell at a later point when that out of money price is in the money. High frequency trading algorithms are also designed to look for patterns in market buying and selling which can also accelerate short-term market efficiency.

That said, not much seems to have changed. The trade deficit, deficit spending, unemployment, and lack of strong consumer sentiment remain high, and economic outlooks for Asia and Europe are low or have been lowered. The U.S. may avoid a recession based on recent data, but not by much and that could be all it takes for the global economic engine to also gear down which itself tends to have an accelerator affect i.e. reactionary economics causes spending to slow until a realistic spending opportunity occurs.  

If countries are buying less, why spend more? Europe is spending all its money throwing good money after bad at flailing banks and inefficient economies within an environment of credit downgrades, and the U.S. government has no money left. Corporations claim to be too afraid of regulations, taxes and future economic conditions to justify spending their $1.8 trillion  in capital per the Washington Post, an amount  about $500 billion higher than the Federal fiscal budget deficit of $1.3 trillion per the Congressional Budget Office. That deficit will be added on to last years deficit and the year before that, it's high. 

Corporations are left in the driver's seat because last year government spending was included in GDP data, unemployment will hold back consumer spending and according to the Bureau of Economic Analysis (BEA), the "increase in GDP during the 3rd quarter of 2011 was due to a "decline in imports, and an increase in government spending in addition to fixed residential spending." Interesting how net imports and exports are included in 'gross national product'. Next year the American Recovery and Reinvestment Act funding will wane even more, and what to do with Bush tax cuts in an election year?

Socialized Debt and The U.S. Auto Industry

Socialized debt led to auto industry sales and increased hiring if Bloomberg's sales data for General motors is any indicator, and if The Tennessean's report that GM is hiring 600 more people in 2012 adds to that thought. This is not to say hiring a mere 600 people and increased sales of 20 percent is necessarily a large reward for such a large loan from the public.  Moreover, other non-bailout companies such as Boeing created an alternate factory in South Carolina to avoid Unions according to a report by CNBC; Boeing is also a large contractor for the government and therefore indirectly subsidized by taxpayers.

So a question that arises out of this data is how effective is taxpayer monetization of corporate debt? If the auto industry had not been bailed out and left to become insolvent would a new private auto industry be better, more profitable and hire more people? According to minute 24:35 of the above Presidential Speech to a Joint Session of Congress. "We should not and will not protect the auto industry from their own bad practices....but I believe the nation that invented the automobile should not walk away from it." Sounds like a no, but yes type of thing to say.

Since the auto industry was not left to fail in the United States one can only speculate as to what would happen if it did. The administration's stance seemed to be, private industry was not capable of taking over where old business models did not work, and that community sustaining corporations could not emerge out of a fractional auto industry of smaller competitors such as Tesla Motors, Inc.  Republicans certainly seemed to be against a $15 billion dollar auto industry bailout according to Human Events. Moreover, according to the Ivey Business Journal, the Japanese auto industry relaxed regulation and favored a free market approach to auto manufacturing after the financial crisis of 2008. 

Is the European Economic Union Approaching a Fiscal Crisis?

It is a matter of numbers, specifically member state budgets, annual GDP, and financing of debt costs to name a few.

According to the European Commission Spring 2011 'European Economic Forecast', the Euro area's total debt ratio is 87.7 percent of GDP and forecasted regional growth of GDP is 1.8 percent in 2011. On the surface this seems manageable, but the possibility of financial issues spilling over into other Euro States presents a possible economic drag.

The European Commission report also studies the 'contagion affect' of sovereign member states and determines "The spill-over to non-peripheral member states is small and not economically relevant." This is in terms of national insurance cost on debt instruments i.e. credit default swaps which isn't exactly a complete and comprehensive measurement of risk.

So why does economics consider this a potential problem? What happens if Greece, Ireland, Portugal and Spain can't finance their cost of debt? According to the European Commission, it seems to present a manageable scenario. However, with a 1.8 percent GDP for the whole of the Euro zone, there is not that much room to maneuver financially. In other words, should default on debt occur within the Economic Union, what is considered 'not economically relevant' might be a potential economic hazard. 

Possible problems that occur with national default or bailouts:

1. Decline in the value of the Euro
2. Increased cost of debt
3. Need for additional bailouts
4. Lower EU GDP

European states that cannot finance their debt are at least a significant factor to an interdependent economic union. Bailing out member states that can't attain deficit reducing fiscal budgets pose an economic drag on those states that are able to manage their debt. The net affect may not be realized or priced into current economic statistics or securities prices. in such case, and if states such as Greece, Spain, Portugal and Ireland can't sustainably maintain debt costs, the potential of economic hazard appears real.

Japan's Economic Affect on Global GDP

According to Roubini Global Economics a 3 percent decline in Japanese Gross Domestic Product equates to a .3 percent reduction in global GDP. The Japanese economy officially entered a recession when it reported a second quarterly decline in GDP; Q1 2011 GDP declined .09 percent and an estimated 3.7 percent drop for the year according to Roubini.

Morgan Stanley forecasted a 4.2 percent global GDP for 2011 in May 2011, however this may not have included the Japanese GDP news that came out on the 19^th of May. If it does, that would make global GDP rise 3.83 percent assuming no previous pricing in. The World Bank puts 2011 real global GDP at 3.3 percent and the Conference Board estimates a 4.5 percent growth. This growth is good, however it is being driven by emerging economies.

Whether or not this will affect national economies such as the U.S. in a good way will be determined in part by how well U.S. Corporations are able to capitalize on international business opportunities where the growth is. A low U.S. GDP in 2011 would consequently seem to indicate an inability to take full advantage of those opportunities. The result of which will likely directly affect main street, employment and potentially business investment.

The U.S. Economy is forecasted to grow 2.6 percent by the Conference Board, however it also states Japan's 2011 GDP will be 1.7 percent. Perhaps this particular conference Board assessment is overly optimistic. The U.S. Economy is forecasted to grow about 2.9 percent according to a UPS assessment cited by Morningstar.

Keynes Vs Hayek Economic Rap

More anti-Keynesian economic sentiment evident in this rap. Hayak is of the Austrian School of Economics according to the Library of Economics and Liberty. Unlike Keynesian economics, Hayak's theory includes the consideration of human actions as a more integral part of the economic principles.  In other words instead of indirectly influencing things like employment through monetary policy i.e. interest rates and money printing, Hayak believed economic policy was better focused on individual motives rather than institutional ones.

What Q1 2011 Leading Economic Indicators Say

The following leading economic indicators published by the U.S. Government Printing Office and sourced from the U.S. Department of Commerce show an increase in consumer spending dollars spent, and industrial production, but a decline in employment and private investment. With little positive change in employment levels and private investment the source of these increases could just be credit.

• Total personal consumption expenditures: $9,486.4 billion (Up)
• Gross private domestic investment $1,800 billion (Down long-term)
• Official unemployment rate 9 percent (Up)
• Corporate profits 1,800 billion (Up)
• Private Employer Cost Index  113.3 (Up)
• Total Industrial Production 93.6 (Up)

Corporate profits are at 2006 levels meaning they haven't caught up with past levels of profit making despite recent increases. With expiration of quantitative easing in June 2011, and the national debt ceiling reached the idea of new stimulus is weak. Economics indicates new growth will have to be organic or take advantage of a relatively strong rate of global GDP growth via return of U.S. based international corporations increasing profits. Any increase in the dollar will help ease inflationary pressures such as gas prices but could hurt exports and corporate profits.

7 Quarters of Growth vs 5.9 Percent Summed Over 3 Years

The cliche glass half full or half empty applies and there are enough numbers to make it all look like a glass puzzle rather than something to drink out of.

The. U.S. economy 'summed' 5.9 percent GDP  between 2007 Q4-2010 Q4. To be fair add 1.8 percent to that for Q1 2011 making the total since Q1 2007 6.7 percent. Yet this doesn't really represent GDP growth just like 10 percent of $14 trillion isn't the same as 10 percent growth on $13 trillion. For example, in the graph below, Q3 2009 shows an 'increase' of 1.6 percent. Is this an increase over negative .7 percent? If it is the actual GDP graph is an illusion.

In any case was still in the right direction for the last 8 quarters, but the source of that growth was in part stimulated by massive government spending in 2009-2010, which is presumably about to be curbed by the 2012 budget and the forecasted end of QE2. 

Source: U.S. Joint Economic Committee

Personal expenditures and exports accounted for most the economic growth in Q4 2010.  If a stronger dollar emerges in the near future, it could mean potentially shrinking exports and lower federal or central bank spending would potentially deflate consumer spending and GDP growth. Steady inflation won't hurt but not if economics refers to steady means as excess of frozen inflation adjusted payrolls.

Source: U.S. Congress Joint Economic Committee