Sweet Orange

Here are some observations on the economy that Chris Thornberg, a principal with Beacon Economics, made during one of his visits to AirTalk. What do you think? He hit the nail on the head?  Or he missed the mark?

• Foreclosures will remain high next year.
• The stock market is the ultimate “drama queen” when it comes to predicting the direction that the economy will trend and, therefore, is not a good economic indicator. (Michael Murphy at Seeking Alpha thinks otherwise, but that’s for another time.)
• An increase in exports is needed if the U.S. economy is to improve. Therefore, the world economy must improve so that we have somewhere to send our exports.
• Although many believe that the root of our economic problems was the housing market collapse, Thornberg says that is a symptom, not the root problem. He states that the root of the problem was that we were spending more than we made. Thornberg further states that debt is what we used to fund this spending beyond our incomes. Note: According to the Federal Reserve, we were spending 127% of our personal income in 2005. Obviously, not a sustainable amount.