Sunday, September 22, 2013

Thumbnail Update

     "The Economist" opined recently that the US is once again coming into the position of being the most healthy major economy in the world, and as such could be an engine of growth for everyone.
     Being "the most healthy" might be rephrased as "the least unhealthy."  Clearly there are still major difficulties.  However, many of the horrible effects of the "great recession" have been worked out of the economy and the financial system.  The US economy has more flexibility in it than most other major economies.  Innovation is not as stifled, entrepreneurship is more healthy and innovation is somewhat easier or less frowned upon.
     Europe is still bogged down pretty heavily, though it looks now as though the Euro area may survive intact.  One of their major problems is that their labor markets are much more rigid than in the US.  For example there are laws that make hiring and firing more difficult for most Euro area employers as compared to the US.  Such rules are a drag on growth, productivity and profitability.
     The "fracking" revolution in the US is the prime example of the fruits of greater flexibility.  The US leads the world by far in this new way of extracting natural gas and oil from the ground.  It has provided previously almost unimaginable quantities of energy; it is projected to so radically reduce our dependence on foreign oil as to re-order world power politics in the energy sphere.  This is big.  How did it happen?  Entrepreneurship, innovation and the freedom to use private property without overbearing government supervision: these are the keys.