Work at Home

[Terry Allison]

Work at Home

Why It Is So Difficult to Recover
Original article at The Motley Fool
By Morgan Housel
July 15, 2011

It is hard to downplay how bad things were 10 years ago. The dot-com bubble burst, erasing 5 trillion dollars of wealth faster than it was created. Decades of slowly eroding U.S. manufacturing jobs turned into a devastating burn. Enron and WorldCom collapsed amid fraud. And then 9-11 hit. How does it get worse than that? What saps an economy is fear, and 9-11 produced lots of it. Not surprisingly, 2001, 2002, and 2003 saw far slower job growth than we have experienced over the past two years.

And yet! In the three years after 9-11, real consumer spending rose by 3 percent a year, faster than the previous 20. Real GDP growth averaged 2.6 percent after 9-11, not far below the long-term average.

How did this happen?

The answer is straightforward, leverage.

One of the most incredible charts I have seen comes from the finance blog Calculated Risk. It shows what GDP growth would have been in the early 2000s without mortgage equity withdrawal, or the extra boost the economy got from homeowners using their homes as ATMs. From 2001 to 2006, as-reported GDP increased at an average rate of around 3 percent. Without mortgage equity withdrawal, however, that growth would have averaged less than 0 percent. Put another way, deprived of leveraging mortgages, the economy would have been in or near recession for most of the last decade, just what one might expect when considering the hell left behind from the dot-com bust and 9-11.

All of this is coming back to haunt us today.

Easy come, easy go
The chorus over whom to blame for todays slow economy is mostly aimed at public policy, with a little hate left over for big banks like Bank of America, NYSE BAC, and Citigroup, NYSE C. President Barack Obamas policies are not creating the necessary jobs, and he has no plan to do anything about it, said presidential contender Tim Pawlenty last week. For his part, Obama has reckoned that Republicans drove the car into the ditch.

Neither is entirely fair. Public policies often have lower impacts than some think. The correlation between tax rates and jobs growth, for example, might seem straightforward at first thought, higher taxes equal lower job growth, but such a relationship is elusive when looking at the data. Government gets blamed too much, Warren Buffett said last week, and it may get too much credit when things do improve.

Policies can and do make things worse, the Great Depression is the best example. But by far the biggest driver of economic success over time is productivity growth and population growth. The good news is that both tend to be fairly consistent over time and, for the United States, rising rapidly. Economies, like stocks, have intrinsic drivers, or the real worth once all the noise is stripped away. For stocks, that value is earnings. For economies, it is productivity and population.

Intrinsic drivers guide long-term results, but what happens in between is erratic. The reason stocks went nowhere over the last decade was not because earnings, or intrinsic value, stagnated. Indeed, earnings grew quite nicely throughout the decade. But returns that should have been spread out between 2000 and 2010 were experienced all at once between 1995 and 2000. From 1995 to 2010, investors achieved a very nice average annual return driven by fairly stable earnings growth. Those 15-year returns just happened to be frontloaded into a five-year period in the late 90s. It is as if we had average rainfall for the year, but got there by a one-day flood followed by 364 days of sun.

Economies go through the same phenomenon. The reason our economy is stagnant today is not because its intrinsic drivers are crumbling, productivity and population growth are fairly strong. It is stagnant because what should have been a slow economy last decade frontloaded a boom by robbing growth from today. GDP growth should have been flat last decade, instead it was 3 percent, driven almost entirely by leveraging real estate. Growth should be decent today, but it is not because we are paying for last decades frontloaded boom by paying off debt.

This is simple stuff, but gets ignored too often. Growth is not slow because of public policies. It is slow because we are deleveraging. Growth will not return when someone else is elected into office. It will return when we are done deleveraging. That will not be this month, next month, or even next year. At current rates, it will be several years at least. That is why it is so hard to recover today. Do not blame current policies. Blame past choices.

Fool contributor Morgan Housel owns B of A preferred. Follow him on Twitter @TMFHousel. Try any of our The Fool owns shares of and has opened a short position on Bank of America. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Another Alternative and a Better Choice. Work at Home
There is a community where an entrepreneur can gain valuable information on a work at home business.

Work at home can happen for you, if you are motivated. Now, there is a work at home community that you can work with and gather as much information that you need to succeed. The community name is Tomorrow's Home Business social community and is located at this address http://tomorrowshomebusiness.ning.com.

In this work at home community, the business entrepreneur will be able to read blogs and watch videos for business, or just for pleasure. With a couple of RSS feeds coming to the main page, the entrepreneur can even stay informed of what is happening in the world. There is something here in this community for everyone.

Groups like the Maniac Marketers come in and post their blogs in the community, giving valuable information for their Health and Wellness businesses. If you would rather watch videos of the TriVita videos, you can do that, too. Or if you just want to hang out and relax, you can do that, too! There are many music videos like Johnny Cash, Waylon Jennings, Pink Floyd, Eric Clapton, and Seasick Steve! Or if you want to learn about handcrafts or see the equally oldest Ford antique car, a 1903 Model A Ford, you can do that, too! Or maybe you need an inspirational video clip! There are many choices of inspirational clips, such as Al Pacinos locker room speech in Any Given Sunday, or Mel Gibson as William Wallace motivating the Scottish men men before battle in Braveheart; or Sylvester Stalone as Rocky and how he motivates himself in the boxing ring, or even his inspirational conversation with his son, and who can forget those chants for Rudy in the movie Rudy!

When you become a member of Tomorrows Home Business Social Community, there is a profile created just for you. You can use the standard set-up on your page. Or you can be as creative as you want to be. For an example check out my profile page at Terry Allisons Profile Page. I use my profile page as a dream-building tool. I have always wanted a Harley-Davidson motorcycle. I have learned to keep this dream in front of me.

A work at home communty for people wanting to find out more information on starting their own work at home business.

Terry L. Allison, Sr.
Creator of Tomorrow's Home Business Social Community
http://terryallison.com
U Make Money Online 2
Phone: [phone]
Skype: allisonmarketinggroup