IT'S NOT ALL BAD NEWS

“Feeling a bit, well, depressed? It’s not surprising. Headlines around the world are filled with the D word, as if an epic global economic collapse were inevitable—especially here in the U.S. It isn’t. No, we’re not hopelessly out of touch. As our coverage shows, we know how serious the current financial mess is—and how important it is to the U.S. and the rest of the world that we begin to settle down our markets. The loss of $8 trillion in stock market wealth in a matter of months is no small thing. The dive will have a major impact on people’s spending and investment decisions. A new economic forecast of 52 leading economists shows most expect the U.S. economy to shrink in the third and fourth quarters, plus the first quarter of 2009—the first time in nearly half a century that the economy will undergo three quarters of contraction. In short, we might be in for a brief, yet brutal, recession. But talk of a depression and other apocalyptic possibilities are way overdone... This is the U.S.’ edge—and it’s not going away soon. Since 1980, real per capita GDP has expanded 69.2% in the U.S. vs. 65.6% for the EU 15. Why? Our productivity is greater. In just the last 10 years, U.S. productivity has expanded 2.5% a year, with Europe growing nearly a full percentage point less. This will widen... Financial crisis notwithstanding, the U.S. economy will be twice Europe’s size by 2025. Even after our stock market and housing losses, the U.S. is still extraordinarily wealthy. In the second quarter, Fed data show, the U.S. private sector owned $110.6 trillion in assets—an immense amount of wealth. The estimated $1 trillion to $2 trillion cost of the current financial mess is small by comparison. During the Great Depression, U.S. output plunged 27% in four years; unemployment neared a third of the work force. Real private investment shrank 87% in three years; personal spending plunged 41%. We’re not close to that. Nor are we likely to be—unless we foolishly pursue high-tax policies that would kill growth. It’s easy to give in to excessive pessimism these days. But the U.S. model—based on productive labor, free trade, fewer rules, lower taxes and rewards for entrepreneurial effort—is still sound. We’ll soon emerge stronger, and better, for our current tribulations.” —Investor’s Business Daily