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business newsOur Ski Jump Economy
By
Peter Atwater
Jul 02, 2010 8:30 am
The economy headed downhill in 2007, and Washington's "launch pad" to propel it back up turned out to be nothing but the world's largest economic ski jump.
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Mr. Bogataj came to mind this week as I was thinking about the best analogy to describe our economy. With the letters “L”, “U," "V," and "W" already spoken for (as well as apparently the square-root symbol), I was looking for a new, simple image that could express how we got here and where I thought we were all headed. And all I could think of was a ski jump.
As I see things, the economy started barreling down the hill back in the summer of 2007, and as the descent gained speed and built up momentum, Washington responded by building what they thought was a fiscal and monetary launch pad sufficient to propel the economy back up the hill and then some.
Unfortunately, as Bennet Sedacca so presciently noted back in 2008, “They can make it jump, but they can’t make it fly.” And what looked like a launch pad at the time has turned out to be nothing more than the world’s largest economic ski jump.
And while we and the rest of the world’s economies got further than Mr. Bogataj did back in 1970 and became considerably airborne (at least as measured by asset prices), I'm afraid that earlier this spring we reached the point at which the force of gravity overcame our upward momentum.
As they say in physics class, “Gravity sucks.” And right now the downward pressure of high long-term unemployment, the lack of corporate investment, along with the expiration of the homebuyer tax credits are rapidly pulling the economy back toward Earth.
With little political interest in a second round of stimulus, bank bailouts, or further quantitative easing, I'm not sure what, if anything, will keep us in the air, let alone cushion the landing.
A few years back, my wife and I visited Lake Placid and, despite my fear of heights, we took the elevator up to the very top of the ski jump tower used during the 1980 Olympics. Standing outside looking down the jump all I could wonder was, “How do you land without killing yourself?"
As an economy, I think we're about to find out whether that’s possible. And unfortunately, while we got further than Vinko Bogataj, it sure feels to me like it's going to be the same agony of defeat all over again.
Position in SPY, SH, and JPM.
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