On February 12 we posted our first survey, in which we asked our readers to express their thoughts on the following questions:
1. Which risk is most worrying to you?
2. What is the strongest argument or evidence that the US is in a sustainable economic recovery?
We received dozens of responses both as blog comments and as direct emails to us, and our conclusion is that the sample who replied are not only intelligent, attractive and prosperous, they are also dour, cranky and bearish. On question 2, 63% felt that there is no evidence at all of a recovery. As one reader put it, “It is indeed hard to see much evidence of recovery, particularly when you throw that ’sustainable’ qualifier in there.” Although as another put it, everything is relative: “But we can still be the OK house in a bad neighborhood.” Of the minority of people who actually found something positive to say, they pointed to corporate earnings picking up. This is true as far as it goes. Reported profits in the S&P 500 have bounced back significantly from the depths of the 4th quarter of 2008 (where they were negative for the first time since S&P began measuring in 1935), but still remain roughly 25% below 2007 peaks and roughly in line with 2005 levels. Revenues, on the other hand, have yet to rebound. As you can see in the chart below, on a trailing twelve month basis they have simply flatlined.
As for question number 1, we got a number of different answers (”The death of demand.” “Global deflation.” “EU deciding not to bail out Greece.” “Entitlements.”), but there was consensus on one thing: 50% of respondents are most worried about ballooning government debts and deficits in the US. Among the knock-on effects of this state of affairs, respondents enumerated higher taxes, lower standard of living, hyperinflation, and whatever happens when the government-supports are turned off. And then there’s this: “Due to the state of finances in the US (Federal, State, Cities, Families), the US will have to borrow large amounts of money from less benevolent countries. I am waiting for the day that China or one of the other [lenders] will attach political demands for financing the next wave of Treasuries. Political demands like — Leave Iran alone; Step away from Israel; Allow Russia to take over a few ex-Communist countries.” Extreme, but not too far-fetched. According to a new poll conducted by China’s state-run newspaper, 55% of Chinese people believe that China and America are on course for a new cold war. Moreover, The Sunday Times of London conducted an independent survey of Chinese-language media and found that Chinese military leaders are predicting a military showdown and political leaders calling for China to sell more arms to America’s foes. As Liu Menxiong, a member of the Chinese people’s political consultative conference, said, “We should retaliate with an eye for an eye and sell arms to Iran, North Korea, Syria, Cuba and Venezuela….We have nothing to be afraid of. The North Koreans have stood up to America and has anything happened to them? No. Iran stands up to America and does disaster befall it? No.” Now, this guy might be the Chinese equivalent of a Glenn Beck-after all, China and the US have a mutually assured prosperity-but these kinds of things are being said in China. And we already have several economic battlefronts at work, including China vs. Google.
Thanks to all respondents, who will receive Annaly umbrellas for their kind participation. Suitable for rain, snow, or radioactive fallout*.
*Annaly umbrella not actually suitable for protection during a nuclear event.