Tuesday, February 2, 2010

An Optimist

I read this article, "Why the Recovery Will be Robust" in yesterday's Wall Street Journal. What struck me is that this is the first time I've heard any economist claim that we will have a strong recovery. The general consensus has been that the recovery will be mild. I really have no clue how strong or weak the recovery will be, but I'm am often skeptical of consensus opinions. If everyone says the recovery will be weak, then I won't be surprised if it's stronger than expected.

I also like the article because it gives a pretty straightforward and simple explanation of how economies work. Here is a good example:

"The popular idea that the economy is driven by "stimulus" spending—as if politicians could capture and bring in resources from outside the economic system—is mistaken. Economies grow as the result of capital being put to work. Capital is plentiful. But it retreats in times of turbulence and uncertainty, coming back to work when uncertainty abates."

I agree that capital is currently plentiful, thanks to all of the actions by the Federal Reserve. Let's hope that businesses do a good job putting that capital back to work, resulting in a stronger than expected recovery.