Predictions for the New Year

From Tim Duy:

Pencil in somewhat stronger growth in 2014. Pencil in a steady reduction in the pace of asset purchases until the program winds down at the end of the year. Pencil in an extended period of low rates. But also recognize that the tide of monetary policy is now receding– albeit ever so slightly– with the Fed’s first step of ending the asset purchase program.

And from the invaluable Bill McBride: Ten questions for 2014.

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9 thoughts on “Predictions for the New Year

  1. Ricardo

    2013 has been the most fiscally conservative year in the past 10 years. There was sequestration and the Democrats shut down the government rather than allow the Republicans to postpone their socialized medicine plan (I guess they knew Obama would do it by fiat after it crashed). As Menzie has pointed out spending decreased in 2013 and the government stopped paying people to be unemployed (remember what happened when Clinton stopped paying people for not working).
    2014 will significantly depend on what congress and the president do.
    1. The Democrats socialized medicine plan is sucking massive amounts of capital out of the productive economy. If there is a continued postponement of the requirements to sign up this impact could be minimized. If the courts find that the President cannot make law this could mean that socialism must be totally implemented and that could wreck the economy.
    2. It appears that the Republicans have agreed to join the Democrats to pay people not to work. If that happens the real unemployment rate will not decrease those the participation rate probably will go down (real or manufactured?).
    3. Sequestration has been essentially ended so government spending will probably return to the excessive level.
    4. Interest rates will begin to rise. Yellen is a rabid Keynasian so any serious restraint in monetary expansion and government spending is out of the questions. Interest rates will probably remain stagnant because the FED knows that higher rates will wreck the federal budget.
    5. Housing prices are being propped up by the government and mortages are still subsidized by both federal and local governments to they will remain higher than the clearing rate so sales will remain sluggish.

  2. Ricardo

    Oops, I forgot two of the biggest drags on the economy, the implementation of Dodd-Frank leading to additional credit problems, and the increased intrusion of Sarbanes-Oxley as it begins to audit the auditors. More intrusion by regulators will increase the systemic risk while preventing businesses from engaging in positive business practices of preventing fraud. Regulators prevent fraud investigations while restricting businesses following good practices. If you doubt that name 5 people from the investment banks that have been prosecuted for wrong-doing.

  3. oso

    began to read Ricardo’s comment, then saw the reference to obamacare as ‘socialized medicine’ and moved past the ravings of an ideologue. maybe ‘idiologue’ would be more apt.

  4. genauer

    @ JDH,
    I provided some recent numbers, on Greek interest rates, with reference to an official source, in your recent “all quiet at the southern front” thread

  5. Ricardo

    Oso,
    You are correct in that the intent of the Democrats is socialized single-payer medicine but the current plan is a Fascist interim plan. The governmeent does not actually own healthcare it only dictates coverage, price, treatment, carriers, hospitals, doctors, medicine, and any other health insurance related activity. I do not use the term Democrat Fascist healthcare plan because most people do not understand the difference. Thanks for pointing that out!

  6. Anonymous

    Glad there are no ‘raving idiologues’ on the left ………. beyond Obama, Pelosi, Reid, public-sector unions who suck at the public teat, and the rest of the Dem party.

  7. Anonymous

    The real GDP table at McBrides site should be sobering.
    The 15 year average real GDP comes in at 2.15%, on a per capita basis the number falls down to around 1.3%; trending well below historical norms.
    Take away the 1999-2000 highs and the 2008-9 lows, – smoothing it out if you will – and the numbers improve only slightly, to 2.4%/1.55%
    Further, a rolling ten year average would suggest that even ignoring the last recession, the economy is clearly slowing down.
    There is an argument to be made that mature economies will grow more slowly, and eventually reach a homeostasis at best, or decline at worse – but that isn’t a very popular thesis.

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