According to a Rasmussen poll this week, 55% of Americans think the country is on the wrong track. Who can blame them? Government debt is the highest it's been since World War 2. Employment is still 3.2 million below its 2008 peak. Gas prices are rising again. Apparently there's a giant asteroid hurtling our way.
But we also have a lot going for us, especially compared with the rest of the world. Here are four reasons you should be thrilled about our situation.
Compared with historic financial crises, we're doing great
There's a difference between a recession and a financial crisis. In a recession, things adjust quickly and get back to normal. In a financial crisis, the adjustments drag on for years as consumers and businesses deleverage, paring down debt, and banks remain reluctant to lend as they repair their balance sheets.
But as billionaire hedge fund manager Ray Dalio put it, America's recovery over the last four years "would win our award of the most beautiful deleveraging on record." Here's one way to show what he means:
Our employment crisis is bad. It's been life-changing for millions of Americans. But compared with historic financial crises in the developed world, it could have been multiple times worse -- both deeper, and with a slower rebound. If we had a normal recession, the recovery we've experienced over the last four years would be pitiful. But given the depth of the decline and the severity of the damage done in 2008, it hasn't been half bad.
America has some of the best demographics of any developed country in the world
Every developed country is aging, including America. That's going to slow economic growth compared with the last half-century, as portions of the population that used to be working, saving, and spending move into retirement and draw down their assets.
But America still has one of the youngest populations in the developed world. Take the Census Bureau's forecast of working-age populations over the next four decades:
America is facing a demographic headwind; Others are facing demographic time bombs, while Japan, South Korea, and Spain are on track to become the global equivalents of Boca Raton. This will be one of America's greatest economic advantages over the next four decades.
American businesses have never been more profitable
Any way you slice it, American businesses are doing better than ever -- by a mile. Take corporate profits:
Profit margins, the amount of profit businesses are squeezing out of sales, are at an all-time high. S&P 500 (SNPINDEX: ^GSPC ) dividends are also at an all-time high, and have grown by an average of 8.6% a year over the last decade. Companies have 40% more cash on their balance sheets today than they did five years ago, giving them the flexibility to invest and expand when they see fit. American consumers are still in bad shape. What would our prospects be like if our companies were as well -- as is in the case of much of Europe? I'd rather not think about it.
And as economist Nouriel Roubini -- one of the more bearish forecasters out there -- told CNBC recently:
Productivity growth is better [In the U.S.] because in all the industries of the future, we're ahead of Europe and Japan. You look at energy technology, you look at biotech, you look at IT technologies, manufacturing technologies, even defense technology.
Last year, consultancy Booz & Company asked global executives what they thought were the most innovative companies in the world. Eight of the top 10 were American companies, with Apple, Google, and 3M taking the podium. (Toyota and Samsung were the only non-American corporations to make the cut.)
That's important, because there are only two ways to grow an economy long term: population growth, and productivity growth. America has some of best demographics in the developed world, and our innovation takes care of the rest.
We have abundant and increasingly cheap energy
Some big natural gas companies have struggled over the last two years. Why? Because they discovered so much recoverable natural gas that prices fell to a decade low. And "U.S. oil production grew more in 2012 than in any year in the history of the domestic industry, which began in 1859," writes Tom Fowler of The Wall Street Journal.
Mark Lipschultz, global head of energy at KKR, summed it up last year: "In North America, we've gone from a place where we thought natural gas was scarce to a place where it's abundant. The implications are significant, and it has the ability to create millions of jobs, transform our dependence on foreign oil, change the trade deficit -- it's really dramatic across the spectrum." The Energy Information Administration predicts U.S. oil imports will fall to 6 million barrels a day next year -- their lowest level in 25 years. That's great news, and it slashes our trade deficit.
America's cheap natural gas is also a big competitive advantage. Natural gas is difficult to transport, so prices tend to differ substantially among global regions. In December, U.S. natural gas cost $3.30 per million BTUs, compared with $10.60 in Europe and $16.70 in Japan. That makes manufacturing in America more enticing than it's been in decades, and provides the incentive to export fuel around the globe. As John Mauldin put it:
If we start exporting value-added natural gas, in the form of fertilizers and plastics and other products that you make from natural gas, we could have a positive trade balance in less than ten years. That would be a shock to the world. Nobody sees that coming.
That would make the dollar so remarkably strong, when combined with the balanced budget, that we would actually deserve to be the reserve currency again. America could be the America that we all think that it should be in our mind, that we would like it to be ... I think America really could have our finest years in front of us again.
I do, too.
What about you?
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