A Recovery Just Right

What will it take to have a healthy recovery in the US from the recent Great Recession? We can use this illustration, provided by the Wall Street Journal, to guide our thinking.

Red bars are fast rising statistics. Blue bars represent quickly falling indicators. And green, indicates factors of modest change.


As with the story of the three bears, we would like to see things in the US economy turn out just right. Let's see what that will take.


In order to obtain a just right result, we need continued growth in the US Gross Domestic Product (GDP). It has been doing well in the last couple of quarters.

We are statistically out of a recession, although it has yet to be officially declared. And pay no attention to the populist & political commentaries about jobs. That's a problem, but it is primarily GDP growth that defines recession & recovery, and NOT jobs growth or lack thereof.

Dare we hope for a rapidly rising GDP? According to the International Monetary Fund (IMF), the future looks pretty bright for world economic growth. The IMF forecasts of a resumption of 4-5% positive growth in the world economy starting in 2011 and continuing through 2014.


Fed Chairman Ben Bernanke would then move to increase interest rates, as he says he is prepared to do--but not until he sees a solid signal that unemployment is declining. Until then, with inflation being very low, he feels he can afford to keep interest rates very low for a while.

This will lead to stabilization in the US dollar--gold bugs will get killed with their speculative holdings--and we'll see onward growth in the stock market.

That's just about right--and we'll feel really good when we see that stubborn 10% unemployment rate come down, perhaps reaching the 5% level which we enjoyed just three years ago when the US economy was coming along pretty fine.