The views expressed in this column are solely those of the author and do not reflect the views of SVB Financial Group, or Silicon Valley Bank, or any of its affiliates.
Gimme some water
- Eddie Money
After four years wandering the desert, it seems the economy has found an oasis.
Whether from reduced uncertainty in today's post-election world or from shear frustration associated with multiple years of disappointing activity, economic actors are moving forward once again.
Viewed over a decade's worth of data, many of the upturns are hazy and difficult to see. In fact, some would argue we are only seeing a mirage and that real activity will be restated away in future quarters.
But given such broad based confirmation of positive action, this is extremely unlikely.
No, the oasis we are seeing is real, as outlined in our fourth quarter Economic Report. The question is how long will the cool, refreshing drink of consumer purchases, homebuyer activity, and manufacturing upturns last?
The Fed would have you believe four years of zero interest rates and $2 trillion of balance sheet growth (with open-ended growth to come) is the cause of the current respite.
Legislators would argue the tens of thousands of pages of stimulus, support, and reform packages that have been passed are the cause.
More rational observers would argue for a combination of the two.
In any case, it is difficult for me to believe this watering hole will last very long because the fundamental changes we've seen in the economy are not likely to support long-term growth.
A Fed that continues to scrape the bottom of its bag of tricks and a legislature that is unable to have even civil exchanges over fiscal policy will only lead to greater uncertainty later in the quarter.
The "victory" over 2012's fiscal cliff will be short-lived, and another kick of the can likely coming in March will only create more cause for concern.
Economists are predicting 2013 growth anywhere from slightly negative to positive 3 percent. Such confusion about the size of the oasis is, in itself, a great uncertainty that works against solid, consistent growth.
The views expressed in this column are solely those of the author and do not reflect the views of SVB Financial Group, or SVB Asset Management, or any of its affiliates. This material, including without limitation the statistical information herein, is provided for informational purposes only. The material is based in part upon information from third-party sources that we believe to be reliable, but which has not been independently verified by us and, as such, we do not represent that the information is accurate or complete. The information should not be viewed as tax, investment, legal or other advice nor is it to be relied on in making an investment or other decisions. You should obtain relevant and specific professional advice before making any investment decision. Nothing relating to the material should be construed as a solicitation or offer, or recommendation, to acquire or dispose of any investment or to engage in any other transaction.
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