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Robert Gordon of Northwestern University shows the optimistic and pessimistic factors in the economy in terms of their contribution to GDP. He says botht he optimists and pessimists ae correct, with the question being the relative strength of the factors. He says the recovery will not be a V shaped recovery , and it will only be half as strong as the recovery of 1983-84, in the range of 3% to 4%, the annualized growth rate between 1982 4th quarter and 1984 4th quarter was 6.4%. Annualized growth according to the Commerce Department was 3.2% in 1st quarter 2010, following 5.6% growth annualized in 4th quarter 2009 In this picture international trade and exports have not played as strong apart as imports continued to rise. Overall personal consumption expenditures held up pretty well and showed +2.55, inventory change +1.57 as companies began to replace IT and other equipment, producers durable equipment and software, federal government +0.11. On the pessimist side residential structures were -0.29, nonresidential structures -0.44, net exports -0.61 showing that exports are not playing the part needed for the economy to recover, and state and local governments are -0.48. The progressively deteriorating situation expected as state and local governments cut back will weigh as aserious negative in this respect says Gordon. And this just as the inventory chnge numbers wind down to a smaller number. The total has to add upto the +3.24% growth for 1st quarter 2010 on an annualized basis as shown in the Bureau of Economic Analysis numbers. ...

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Justice Kennedy in a prevailing opinion that seeks to let a cross stand in the Mojave National Preserve says- " the cross evokes thousands of small crosses in foreign fields marking the graves of Americans who fell in battles, battles whose tragedies would be compounded if the fallen are forgotten." In 1934 private citizens put a cross on federally owned land in the desert preserve. This remains there till a park visitor sues in 2001, 67 years later. Just to keep the cross the government has to transfer the land to the Veterans of Foreign Wars, till the same park visitor challenges the transfer. Frank Buono is an Oregon resident and an assistant superintendent in the park who is the vistor who challenged the presence of the cross in 2001. Since a lower court ruled it unconstitutional a plywood box was placed atop of the cross which lies on Sunrise Rock in San Bernardino county. The Interior Department and its Secretary Salazar have argued that the cross should remain where it lies in the case Salazar vs. Buono....

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The simple fact that countries like Greece and Portugal cannot adjust their exchange rates under the existing euro currency arrangement remains a critical problem says Krugman. Krugman points out that till 2007 Greece's budget deficit was no higher than America's as ashare of GDP than the deficits America ran in the 1980's, and Spain actually ran a surplus. The global financial crisis changed all that as inflows of capital dried up, revenues plunged and deficits jumped. Now membership in the euro area becomes a sort of trap in that Greek costs which rose quickly in the boom years now need to come down in relation to German costs, and the only feasible way of doing that would be to devalue the Greek currency, now impossible under the euro currency arrangement. The euro currency he says is in serious danger unless forceful action is taken to avoid a chain reaction that starts with a Greek default.

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Boone and Johnson point to the problems facing Portugal as being worse than that faced by Argentina when it defaulted on its debt in 2001. Portugal they say spent too much in recent years with the help of Euro-money letting debt rise to 78% of GDP compared to Greece's 114% of GDP and Argentina's 62% of GDP at default. The lack of the option for a necessary devaluation under the euro currency makes the situation worse. At this point the situation is simply being postponed as the European Central Bank will continue to let the governments issue bonds, which European commercial banks buy and deposit at the ECB as collateral for fresh printed money.

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Simon Johnson and Peter Boone say not taking forceful action with the large banks- taking them through bankruptcy and restructuring procedures as advocated by senior Federal Reserve officials like Peter Hoenig- will only lead to irreversible damage. The current Geithner-Summers policy being followed by the Obama administration is simply to hope that by fiscal stimulus and economic recovery the banks may be brought to sustained profits and be able to muddle through their financial problems. This Johnson argues is not likely to happen and the cost will be higher debt levels for America, irreversible damage as America faces low debt and financially stronger countries in Asia and sees its position in the world weaken. The muddle through policies for banks of the Obama administration have little prospects in the face of an IMF estimated $275 billion shortfall in capital on balance sheets at large banks (from the IMF Global Financial stability Report). Without aggressive action on the banks America's recovery and renewal will only delayed....

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There are some major problems in the American jobs market which suggest a long drawn out effort to reduce the high unemployment rate. One is the divergence between the vacancies that are developing and the rate at which firms are filling these vacancies. With vacancies remaining, unfilled and firms remaining cautious about the economic outlook and leery of hiring, the increase in economic output or GDP growth of 3% expected on the optimistic side in 2011 is not translating into lower unemployment. Structural problems are causing a great deal of difficulty in reducing the jobless rate. The recession hit manufacturing and construction very hard. And those who worked in these industries are not those with the skills and training to take up jobs in health care and education or other similiar fields- here skill mismatches are the problem. Geographic factors and the property prices drop are creating additional barriers. About 25% of mortgage borrowers owe more than their property is worth, and their are fewer buyers in regions with depressed job prospects like Michigan. There is a large increase in long term unemployment- over 27 weeks. Those out of work for more than 6 months see their skiils, job connections and confidence erode. A Brookings Institution paper estimates that this rise in long term unemployment by itself can cause labor market recovery to take twice as long as after the 1982 recession under Reagan, when unemployment reached a high of 10.8% and took 2 years to get back to 7.5%. Add to this the fact that a lot of jobs were lost in 2008 and 2009, with a six percentage increase in unemployment in a short period unmatched by anything since the Great Depression, with long term unemployed reaching 6.5 millon or nearly half of the total. And the 3% growth rate estimated by the government is anything but certain. It is questioned by the IMF as a stretch. This does not take into account the problems in the banking sector, as home equity loans gone bad show up on their balance sheets in latter part of 2010. According to a CreditSights report (see the US economy in 2010 in Group search for more information on this) with estimated losses of $33 billion. A struggling banking sector and tighter credit will add a structural dimension from the banking sector to the wobbly hiring. The "muddle through" approach to banking problems of the Obama administration in tackling bank's bad debt will continue to pose risks....