Sometimes when I see how media and investors react to economic news, I sometimes think they are all firm believers in Magic Wands. The economy overheated and because of easy credit and some ill advised Government and non-government policy, we found ourselves in a situation where a great amount of apparent wealth disappeared, housing collapsed, companies laid off millions of workers and the Government, whether wisely or not is still to be determined, intervened to ward off total economic collapse.
Now, since the worst of the crisis things have improved, and with any luck we will see some job growth in the near future. Also, many companies (at least the ones that survived) will come out of the crisis leaner and meaner and will be more profitable than before (at least on a margin basis). However, we are not all going to wake up one day and discover it is 2006 again.
We have established a new baseline for the economy and we need to adjust to it. Growth will be from that baseline and it will take us years, baring another bubble, to get back to where we thought we were. Many of the jobs that were shed, are not going to come back due to enhanced productivity (think technology and foreign suppliers). The Government debt is going to be a drag on the economy especially if we don't figure out a way to pay it down at least a little.
The country has taken a heavy hit and it has gotten off the mat but it needs to be careful in how it proceeds. Recovery is happening, but not magically.
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