US on the Verge of Another Economic Boom? Or Bubble?

[TOMapleLaughs]

Yes, most economic news throughout the world lately has been bad. But i thought about how manipulated the US economy has been since the 60's. After considering the massive early 80's Reagonomics boom (peaked 1984) and then the tech boom of the late-nineties (peaked 2000), is this wave ready for another peak by 2016 to 2018? If so, what will be the reasoning behind it be?

The answer is energy. Cheap energy. The US is currently going hog-wild on oil and natural gas production. It aims to be a major world energy player in the next few years, and that's going to fuel it's resurgence in manufacturing.

The financial headlines have all been bad lately...

Gold is at a three-year low and down 36% from its highs. Silver is down a staggering 62% from its highs.

China's growth has stalled. And the Chinese government just told its citizens they're on their own if the banking systems gets hit with a liquidity crisis.

There's an exodus out of U.S. bonds, the most since October 2008. Bond yields have spiked, an ominous sign that raising interest rates are on the horizon.

Bernanke told U.S. investors QE will be coming to an end. The Dow just experienced a 7% sell-off.

In light of the NSA scandal, Russia, China, and even tiny Ecuador have flipped Uncle Sam the bird.

There seem to be riots everywhere.

And where's Obama? Talking about climate change as his centerpiece legislation for his second term...

I'm here to tell you to forget about all that crap.

Because the United States of America is on the upswing. A big one.

Seriously.

I just spent the last three days by the pool reading Comeback: America's New Economic Boom, by Charles Morris.

Much of what Morris says in his book is exactly what we've been writing about here at Wealth Daily — that the U.S. stands at the threshold of an energy renaissance that will propel it far ahead of its economic competitors.

With natural gas so cheap, the United States is the lowest energy cost provider in the world.

And that means manufacturers will relocate to the States to take advantage of cheap energy. Manufacturers currently here will double-down on their capital investments to lock-in cheap natural gas prices.

According to Morris:

It's the best-kept secret in the economics media: The United States is on the brink of a period of solid, long-term growth rivaling that of the 1950s and 1960s. It is not a finance-driven, self-destructive boom, like the 2000s' housing bubble. No, the new economy will be durably grounded in energy and heavy manufacturing, even though it will take several years to come to full fruition.

Evidence? Dow Chemical has commenced a $4 billion development in new plastics manufacturing in Texas, for example, that will start coming on stream in 2015 and be fully operational only in 2017, but it will be productive for a very long time. This will be a growth cycle with staying power.

Why haven't you heard about the boom? Official economic forecasters, like the International Monetary Fund and the Congressional Budget Office, simply have not factored America's emerging new economy into their forecasts. Instead, they still see us limping along at an average of 2 to 2.5 percent real (after inflation) growth to the farthest horizon — a hobbled, aging power, borne down by debts and deficits, shorn of its old bounce-back vigor, tottering along just fast enough to stave off out-and-out stagnation.

There is no question that the financial crash has left deep economic scars. But the fundamentals will turn in America's favor and when they do, annual GDP growth should kick back up to at least the 3.3 percent average real growth rate that has prevailed since 1950. That's far from a startling forecast for a recovery, but even at that level, the budget problems that have so paralyzed official Washington will shrink rapidly in the rear-view mirror as tax receipts grow, making debts and deficits shrink. The seemingly crushing post WWII debt — 120 percent of GDP — quickly dropped from the radar screens with growth in the 3-4 percent range in the 1950s.

The most salient is the sudden emergence of the United States as a major energy producer. A recent U.S. Geologic Service study concluded that the Bakken Shale in North Dakota and Montana, already crowned as the U.S.'s largest-ever gas and oil reservoir, has far greater recoverable reserves than previously thought. At about the same time, a team from the University of Texas completed a well-by-well analysis of the Texas Barnett Shale — the most intensively developed shale field in the world — and confirmed that the fields can support decades of further development. The current official estimate — that by 2020 or so the U.S. will surpass Saudi Arabia in oil output, and Russia in gas — remains on track, and the country will be a major global energy producer far beyond that, which will do wonders for the U.S. trade deficit.

Each shale well requires up to 100 tons of high-quality steel pipe; fleets of specially adapted trucks and trailers; a small hangar of earthmoving, drilling and other equipment; specialty chemicals, sands and ceramics; and some very high-end seismic and other underground imaging gear. Many of these products are now U.S. specialties. According to the annual Oil & Gas Journal survey, American oil and gas industry investments will total $348 billion in 2013, equivalent to about 2 percent of GDP, with much of the investment flowing in from overseas.

But it goes far beyond chemicals. Nucor is the world's most profitable steel company, and arguably the smartest. It has locked up long-term supplies of natural gas so it can shift to a highly efficient, but extremely energy-intensive, way of making iron that would not have been possible at the prices charged for conventional energy. Within a few years, all of its American plants will run on natural gas. U.S. Steel is experimenting with similar technologies.

[Xbox]

Well, I hope the economy there gets stronger. It's better here when it's better there. And no one likes to see recession's.

[skolozsy2]

Well, I hope the economy there gets stronger. It's better here when it's better there. And no one likes to see recession's.

[Henrik Kesler]

I think it's set to take off again because of energy development. The article didn't mention the Marcellus and Utica Shale deposits in the Eastern US which not only has natural gas, but oil another 5-10,000 feet below the gas deposits. Early and conservative estimates are that there are 50 years of developable energy in these deposits. It will be very interesting to see how the energy development plays out in the US.

[GLASSJAW]

Quick, someone tell me what I should be investing in

[Henrik Kesler]

Quick, someone tell me what I should be investing in

[TOMapleLaughs]

Quick, someone tell me what I should be investing in

[Absent Canuck]

The US has been mired in recession and stagflation for 5 years now. Its about time they came out of it and went into a boom cycle.

[Henrik Kesler]

Get in the Fed.

[CB007]

I'm skeptical that a booming energy sector would have a 'boom' impact on the whole US economy, because I do not see 'cheap' energy as a major influencing factor for companies to relocate from overseas back to the US. Surely these are positive news, I just doubt the magnitude of their effects to be as great as they say.

[Lancaster]

More and more energy flooding the market and yet oil prices are still through the roof.

I believe the US economy will collapse to even worse than the actual Great Depression. Eventually the Feds will have to stop printing money, interest rate will rise and the bills will eventually need to be paid.

If I had excess dough lying around, I'd invest in commodities.

[CB007]

Knowing the Fed, they'll screw the whole thing up by continuing to print free money.

[CanuckRow]

Money is made electronically. 'Print' is only a metaphor.

[Amish Rake Fighter]

We could have the mother of all economic booms if we could get the private banks off our backs.

Instead of the Bank of Canada printing the money and the government spending it into existence through public works projects (or lending it out and keeping the profits) our government borrows money from private banks at interest. That's why our debt is so huge. It's the mother of all scams an completely unnecessary.

The international banking cartel, through the BIS (Bank of International Settlements) ordered our government to start doing this in the '70s under the bullsh!t reason that it would stabilize our currency. Look at a graph of what happened to our debt after that happened and all the public assets we've had to sell off.

[CanuckClown]

We could have the mother of all economic booms if we could get the private banks off our backs.

Instead of the Bank of Canada printing the money and the government spending it into existence through public works projects (or lending it out and keeping the profits) our government borrows money from private banks at interest. That's why our debt is so huge. It's the mother of all scams an completely unnecessary.

The international banking cartel, through the BIS (Bank of International Settlements) ordered our government to start doing this in the '70s under the bullsh!t reason that it would stabilize our currency. Look at a graph of what happened to our debt after that happened and all the public assets we've had to sell off.

[MillerGenuineDraft]

Well, I hope the economy there gets stronger. It's better here when it's better there. And no one likes to see recession's.

[Amish Rake Fighter]

If the Bank of Canada printed off money to stimulate our economy, like you suggest, inflation would occur; devaluing the currency.

To get around these inflationary pressures the government borrows money via bonds. A fixed loan that will not result in the creation of money and the market won't be flooded with dollars when there is no demand for them.

[Offensive Threat]

Pipeline companies. There is a ton of oil and gas to get out of the ground and no intermediary with which to carry it to paying customers. Needless to say, there will be a huge investment in pipeline infrastructure so that the oil and gas can reach end consumers.

[MillerGenuineDraft]

If the Bank of Canada printed off money to stimulate our economy, like you suggest, inflation would occur; devaluing the currency.

To get around these inflationary pressures the government borrows money via bonds. A fixed loan that will not result in the creation of money and the market won't be flooded with dollars when there is no demand for them.

[CanuckClown]

You're wrong. Inflation would occur regardless. The only reason money would be printed is to achieve that GDP that the government wants.

Thankfully, the BoC fux with the interest rates, which in return responses to our money supply. The US, on the other hand, fux with the money supply, which in return, affects their interest rates. That's their problem.