Economic World has Changed Radically

I just read a fascinating article by Robert V. Green that lays out the real problems of the US economy.

This is a sea change... and deserves your immediate, close attention.

Here's what he said, in part...

The Economic Drivers Are Gone

This means that all four of the major economic drivers of the past twenty-five years are now gone.

* The demographic driver is gone, as the baby boomer bulge has passed.
* The technology driver is gone, as new investment is curtailed and current technology has matured.
* Tax rates will not be used to provide stimulus.
* Credit is now restricted, in strict contrast to its ubiquitous presence.

This leads, then, to the major question.

What's Next?

What is the next major driver of the economy?

At the moment, the answer to that question is unclear.

Although there is a lot of optimism and well-being created as a result of Barack Obama's win, the truth is that a president cannot do much about creating major drivers.

No one, not even a president with Congressional support, can create demand. They can only encourage or discourage existing demand.

The only real impact presidents can have is through tax policy. The hope of lower tax rates vanished on Tuesday and the sharp decline of the market in the following days reflects the market's recognition of this. (See the Ahead of the Curve column of Monday, November 3, 2008, where we predicted this reaction.)

So what major new driver will spur growth in the U.S. in the coming years?

At the moment, we do not know the answer to this question. Neither does the market.