U.S. Economic Curtain Call

As long as I have studied economics, I have been a firm believer in at least the basic principles of free market economies. Not only has our U.S. economy been a poster child for the benefits of markets, but there have been numerous examples of other countries finally thriving after years of excessive government control and oppression once the flood gates opened to free, or at least "free-er" markets. That belief aside, however, even free market countries mature or peak after experiencing their first long periods of economic exuberance; is our country any different?

Now don't get me wrong, I'm not a doomsday soothsayer, but is it possible our country is about to enter a period of coming to grips with simply average economic growth, or even worse, flat to negative growth? We're still quite a relatively young country compared with other big players, the Great Britain's, the Frances, etc. Naturally, as time goes by, wealth comes and goes, cycles boom and bust, and leaders change. Probably the easiest and perhaps cliché way to make the point is to simply mention the Roman Empire. Of course, the Roman Empire is the extremist of extreme examples in the boom to bust phenomena, but it does prove the point that today's leaders aren't always tomorrow's.

We as US citizens have been fortunate to have the largest and most prosperous economy by many standards for quite some time. In fact, it's been so long that many of us don't remember things any differently. Sure, we have read about the Great Depression in textbooks and heard it discussed with more vigor after the recent financial crisis, but until the last couple years and what we've now gone though, I don't think it was tangible enough for our generations to understand or imagine it could actually happen again.

It is scary to think of how close we were to being back in the Great Depression again. As bad as things got, our financial system did not crumble, though it is by many popular opinions quite deeply bruised. After the Great Depression, and then two World Wars, our country roared back to see perhaps the greatest period of prosperity any country has known in modern times. Nothing says we can't see another great boom, but one has to wonder, will we ever see growth and prosperity the way we did, say, in the 1990's?

One thing makes all these comparisons inevitably difficult: technology. Even as rough as things may have been the last year, I don't think many people could say that it was rougher than the number of great expansion periods between the 1940's and 1970's. Even someone taking a pay cut now or accepting a "lower quality" job still has flat screen TVs, numerous channels to choose from, and a laptop computer to watch You Tube. Even during the best of the post World War times, none of that was possible. Yet still, if we stick to a simple conception of "boom times" as percentage growth in GDP, we may be more of a Microsoft than a Google right now (no offense to Mr. Gates).

Think of it this way; we're actually discussing things today that would have never been whispered not too long ago. There is actually legitimate talks that the US dollar may not be the most widely-used, pseudo "global currency" anymore. Many think the Euro could become the most important currency, and even some talks now breach the subject of one global currency (I'll reserve my own opinions on that one!). Likewise, after this financial crisis and the rising national debt, there have actually been talks that investors could question the risk-free status of the US Treasury Bonds, the asset in almost every economic textbook and financial investment model used as the infamous "default-free" rate! I have literally heard college professors and economists say the exact phrase that "The US Government could NEVER default!" Never say never? The fact that it is even discussed could at least indicate a shift in global economic thinking.

Another eerie indication comes at the mere sight of looking at a long-term chart of the S&P 500 Stock Index. I have always been more of a fundamentalist that a technician or chartist, but the sight is rather thought-provoking. The chart is one massive double-top formation with peaks around 1500 points both in 2000 and 2007 and subsequent massive falls. Of course, these technical chart formations typically are indications more used by traders to predict short-term moves in market prices, but the effect to me is potentially more symbolic than anything; is our country's economy experiencing a massive, long-term double-top, the likes of which will send us into a phase maturity and mediocrity, maybe even stagnation, for the foreseeable future?

Only time will tell for sure, but it could be at least worth the acknowledgement to the possibility that the market rally post-dotcom bubble until October 2007 was nothing more than a final curtain call in the prosperity of our great economy, with the final bow coming in the form of a near financial tragedy of Shakespearean proportions. I for one am hoping for at least another sequel in the free market screenplay drama...maybe we can sign on Steven Spielberg? After all, Hollywood has grown us accustomed to happy endings!