The Economic Flop that Was 2010
The year is almost over. Time to write the obituaries.
What kind of year was it? A flop. A failure. A loser. Just like we said it would be.
It was a “year that fizzled,” writes David Leonhardt in The New York Times.
It was the year that the economy started to recover and then slid back into a slump – only to offer reason for renewed hope in the final weeks.
When 2010 began, hiring and consumer spending were finally picking up. But then something changed in the spring – a combination of the debt troubles in Europe, the fading of stimulus spending and the usual caution by businesses and consumers after a financial crisis. By the summer, the unemployment rate was rising again, and Americans’ attitudes about the future were again souring.
Making matters worse, many of the economy’s long-term problems also became more severe this year. Health care costs continued to rise faster than inflation, and the number of uninsured continued to grow. The most recent climate data suggested 2010 would be the hottest or second-hottest year ever recorded; the 10 hottest have all occurred in the last 13 years, creating serious risks for the planet and its economy. The federal budget deficit ballooned further (though it should grow during an economic slump).
Fizzled? Nah. He just doesn’t understand what is going on. The year couldn’t fizzle out. It never had any real gas in it. It was flat and lifeless from the get-go.
No great progress for humanity was made in 2010. There were no great achievements. The health care bill was a muddled fraud. The iPad may make communication easier. Then again, it might make it harder. The year’s big movie – Inception – was a dud.
But what about the economy?
The real, private economy spent 2010 paying for mistakes it made over the last 20 years – particularly in the last 5 years. It couldn’t undertake anything new; it had to reckon with things that it did in the past.
Consumers generally paid down debt…or defaulted. Businesses hoarded cash and refused to hire new employees. Bankers made fortunes gaming the Fed’s easy money system. They took the Fed’s money and speculated. They lent out little money to the real economy.
Meanwhile, the authorities were actively making the situation worse. Not just with low interest rates. They had other bamboozle programs and crackpot projects – notably “quantitative easing.”
In Europe, peripheral countries such as Ireland and Greece were deep in debt. So, what did the authorities do? Lend them more money! Result? They are deeper in debt at the end of the year than at the beginning of it. Now, their problems are worse than ever.
In America, the year ends with the private economy a little better off and the public economy a lot worse off. Two trillion worth of debt and liabilities were added to federal accounts this year. In terms of federal finances, the average man, woman or child will be about $7,000 poorer when he rings out the old year.
This extra money was supposed to spur the economy to growth and prosperity. Did it do so? There is no evidence of it. Housing will generally be cheaper at the beginning of 2011 than it was at the beginning of 2010. And fewer people will have jobs.
Among investors, some did well…some did poorly.
But at least our Dear Readers will have something to celebrate. Just as they have had every year of this millennium. Gold investors end the year nearly 30% richer.