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So there are some reasons for a little optimism, but it is difficult to make projections without knowing the budget agreement.
McBride reasonably expects growth to pick up because housing and local government are coming off the bottom. Where I differ is that I doubt that housing will be the growth driver that it has traditionally been. The overhang is still out there and will take more years to dissipate. Most people now realize that too much house can be a burden.The other asset bubble is common stocks, which have been boosted by record setting profit margins. This can't continue, as high profits correspond to low wages and, consequently, low purchasing power. The ownership society has stalled, and the owners haven't yet come to terms with this bad news.McBride and others think that we'll be back to normal now that the housing excesses have been worked off. But the housing bubble was a result of lack of other opportunities. Housing was the one sector that couldn't be offshored.Where do we turn now? A renewed focus on the federal budget deficit isn't helping things. We're jumping on the austerity bandwagon since no other ideas are politically acceptable at the present. It's like the drunk looking for the keys under the streetlight.
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