Post-Subprime Economy Means Subpar Growth as New Normal in U.S.

[marmar]

from Bloomberg:



Post-Subprime Economy Means Subpar Growth as New Normal in U.S.

By Rich Miller and Matthew Benjamin

May 19 (Bloomberg) -- A normal U.S. economy is likely to look a lot different, and worse, after the credit crisis is over and financial markets settle down.

Companies will continue to struggle to raise cash for expansion and innovation as investors and lenders remain focused on conserving capital. Workers, too, may have less flexibility to go after new opportunities, because many will be stuck where they are -- in homes worth less than the balances on their mortgages.

``Once you've made terrible, overly optimistic errors, that paralyzes you for some time,'' says economist Paul Samuelson, a Nobel laureate.

The bottom line: The U.S. may have to get used to a new definition of normal, characterized by weaker productivity gains, slower economic growth, higher unemployment and a diminished financial-services industry.

Long-term growth in the U.S. may drop to 2 percent to 2.5 percent a year from the 3 percent rate of the last 15 years, according to Peter Hooper, chief U.S. economist at Deutsche Bank Securities in New York and a former Federal Reserve official.

Even after markets recover, ``the cost of risk capital is likely to be significantly higher than during the credit bubble,'' he says.

A record three-quarters of U.S. banks the Fed surveyed in April said they were charging corporate borrowers a higher premium over what the lenders pay for funds. More than half reported tightening lending standards. ......(more)

The complete piece is at: http://www.bloomberg.com/apps/news?pid=20601068&sid=aVZRne8kZBGI&refer=home

[El Pinko]

1. Oh well, at least I can live on the massive savings I socked away during the wonderful "boom" years.

:sarcasm::sarcasm::sarcasm::sarcasm::sarcasm::sarcasm::sarcasm:


How is it that the upper half or so of income earners manage to stay to completely clueless as to the world of shit the other half has been living in for the last 8 years (if not clear back to Reagan's time)???