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Greenspan On Board With “Two Economies”

24 February 2010 No Comment

I’ve been saying for about a year now that the recovery in this country is not a full, robust recovery (if a recovery at all).  The economy has basically been split into two economies: 1) the Wall St. and big corporation economy and 2) main street, small business, real economy.  The former economy is thriving with cheap money and government stimuli while the latter economy continues to die.

In a recent speech, Greenspan is calilng the U.S. recovery unbalanced.  According to the article:

Former Federal Reserve Chairman Alan Greenspan said on Tuesday the U.S. economic recovery was “extremely unbalanced,” driven largely by high-income people benefiting from recovering financial markets and large corporations.

This trend will continue.  The only way the trend breaks in my opinion is if the beneficiaries of the current policies somehow take a hit from a withdrawel of stimulus and/or an increase in debt losses.  Or, other words, until there is another leg down in the broad economy.  The alternative would be if the struggling real economy rebounded to catch up to the large business / Wall St. firms.  I don’t see that happening.

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  • Ted said:

    After thinking a lot about the Bush then Obama bank bailouts (and auto industries etc), I really wonder if it will have the long term impact we hope for. In America, we feel we have a right to a great job and for our companies to keep going. That our biggest companies (and banks) have a right to succeed and that will somehow filter down to the rest of the economy, but it seems like it only worked to a point. And now small businesses and budding technologies need more tax relief and help to stabilize the growing rung of the economy at the expense of certain larger corporations and banks.

    I see that those with money benefited the most from the bank and auto bailouts- while the everyday worker and middle class person did not. Maybe they lost retirement money, but did they gain it back after the bailout? No. I say we need to be more risky in allowing certain organizations to fail in order to streamline the top heavy corporations serving the wealthiest and broaden the everyday and small business jobs. Keeping more workers stateside, exporting more goods, etc.

    So I am wary of trusting stock markets etc in the recent economic wake- I may stick to safer investments until I build a big enough base of savings and investments then become much more risky as I have enough cash on hand. Mark Cuban had a great post about how to get rich based on building a surplus of cash for times when the market or business opportunities present opportunities to cash in.

    Thanks for the thought provoking post.