Perhaps the most promising sign of all is the new home-sales increase, which suggests that lower prices and interest rates are drawing buyers back into the market. Housing prices are still too high. But they continue to decline as prospective buyers wait to scoop up bargains resulting from the subprime mortgage foreclosure debacle.
"With the interest rate spread ... normalizing, conforming mortgage rates should go down a bit, an important trigger for stronger home sales," said Wall Street economist David Malpass. Malpass thinks GDP growth, consumption and some corporate profits "will exceed current expectations in the second quarter and the second half ... as (the Fed's) monetary stimulus takes full effect."
The soaring value of oil and record gas prices remain a huge drag on the economy, though oil costs will be somewhat offset by lower interest rates. A stronger dollar would help bring down oil prices, too. Meanwhile, the tax rebates and the Fed's rate cuts are slowly working their way through the economy's bloodstream.
Democrats want us to believe the economy is in crisis, but it isn't. We are in a sharp slowdown, one of many our country has experienced and overcome many times before. It is instructive to recall the economic upturn in the second half of 2003 in response to the Fed's deep rate cuts when "stocks, bond yields and the economy all soared," Malpass notes. At this point, there are glimmers of recovery that suggest this downturn may be shorter and shallower than anyone predicted. Americans are understandably pessimistic, in part by what is going on in their states and communities, but also due to a drumbeat of negative stories on the nightly television news, a gloomy oracle that sees nothing but doom ahead.
Yet through it all, we remain the largest economy in the world, producing $14 trillion worth of goods and services each year, selling $1.4 trillion of stuff abroad in a vigorous global economy running flat-out on trade. We got whacked hard by the housing collapse and credit crunch, but it's good to remember that we have a very resilient economy that has pulled us out of innumerable panics, recessions and depressions.
We'll grow and pull ourselves out of this downturn, too, a little wiser for the mistakes that were made. Things may appear a bit gloomy now, but there is every reason to be confident about America's future.
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