EconomicCrisis.US

What will happen to the US economy in 2011? If you’re referring to profits of big corporations and Wall Street, next year is likely to be a good one. But if you’re referring to average American workers, far from good.

The two American economies — the Big Money economy and the Average Working Family economy — will continue to diverge. Corporate profits continue to rise, as does the stock market. But typical wages are going nowhere, joblessness remains high, the ranks of the long-term unemployed are rising, the housing recovery has stalled, and consumer confidence is sagging again.
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Which of these stories is true?

The American economy is in recovery. Consumers spent more this holiday season than they had since before the recession, beating even the most optimistic forecasts.

The American economy is in retreat. National unemployment is holding steady at nearly 10 percent, and no one is forecasting lower numbers for 2011. Consumer confidence is down – again – in December. Home prices are still falling, and in fact have fallen about 30 percent from their peak.

Both stories are true, which shows how the recession has affected different groups of Americans.
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The world has changed since the Federal Reserve decided in November to purchase an additional $600 billion of U.S. Treasury bonds to give the U.S. economy a lift.

The U.S. economy looks stronger. The government is unexpectedly cutting taxes. The Fed is facing stiff political criticism at home and abroad. In part as a result of these developments, the very long-term interest rates the Fed was trying to keep down are rising.

Does this change the Fed’s conviction about the “quantitative easing” program, also known as QE2? The answer in short: If the Fed had known in November what it knows now, it would have made a tough decision even harder, but there’s a good chance it would have proceeded anyway. Moreover, it’s unlikely to change course now unless there is a much bigger improvement in the economic outlook or uptick in inflation.
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What will happen to the economy and the stock market and interest rates in 2011? This is the season for forecasts and prognostications. But that’s not what most people are thinking about when they wonder what’s in their economic future for the year ahead.

The one economic question on most people’s minds is whether the United States will grow again, and whether their lives will ever be materially better, and most of all — whether their children will have a better life than they do.

A Facebook poll taken a few months ago revealed that many had worked hard all their lives, lost significant ground in the recession — and were not at all optimistic that their children or grandchildren would have a higher standard of living.
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