Which is better for a country’s well-being: $10 million spent constructing a jail, or $10 million spent producing a line of smartphones? How about clear- cutting rain forests to produce $10 million in lumber? Or a storm that requires $10 million in repairs?
In its latest report on U.S. economic output, the Commerce Department revised up its estimate of growth in the third quarter from a ho-hum 2.0 percent to a healthy 2.7 percent. But if you dig a bit deeper, you'll find at least an equal-sized serving of bad news.
The U.S. economy will probably gain strength during the second half of the year, while the risk of a relapse into recession has risen, said James Hamilton, an economics professor at the University of California, San Diego.
Federal Reserve policy makers may start weighing additional steps to prop up the recovery after growth fell below 1 percent in the first half of this year and economists began cutting second-half growth forecasts.
Economics isn’t rocket science, but the U.S. economy is a little like a rocket. If it has enough thrust, it can escape the tug of economic gravity. Not enough, and it just might go into a tailspin. Economists at the Federal Reserve and elsewhere are studying whether today’s slow growth is a precursor to an outright recession -- and if so, why.
St. Louis Federal Reserve Bank President James Bullard, who was the first Fed policy maker to urge the round of bond purchases that started last year, said the central bank isn’t signaling a third stimulus program with its commitment to keep rates near zero through mid-2013.
Carmignac Gestion has switched to Treasuries from German debt on a bet that 10-year U.S. yields have further to fall because the Federal Reserve will support the world’s largest economy as it faces the risk of recession.