Wednesday, December 30, 2009

U.S. Government: The New Growth Industry

(Editor's Note: This article originally appeared in Jason Farkas' November 6 "Weekly Insight" column of EWI's intensive Currency and Interest Rates Specialty Services.)
The United States is facing a lot of problems, but one U.S. industry remains strong. It has access to capital and has increased in size every single year since 2000. Should you invest in this industry? Don't bother -- you already have.
This mystery industry is the U.S. government, and its unbridled growth remains a reason to be bearish on the U.S. economy.
Don’t be fooled into thinking the Great Recession is over because of the 3.5% gain in third-quarter GDP. The only reason for the uptick was the government’s contribution, as seen in the chart (courtesy of the Cato Institute):

Because the government’s size has increased so dramatically since 2000, the U.S. is now closer to socialism than capitalism. A February Newsweek cover hit on that sentiment with its title, “We’re All Socialists Now.” A socialist economy is inherently inefficient. Resources are taken from the private sector and redistributed to a wider group of citizens, which is costly, and those costs lead to a smaller economic pie for everyone.

A chance reading of a book on technical analysis and the Austrian school of economics led Jason Farkas, CMT, to EWI. Prior to joining the firm, Jason worked for 14 years as a futures, options and equity trader. He has been tutored by some of the best investment minds, including legendary trader Dick Diamond. You can read Jason's Weekly Insights every Friday in EWI's intensive Currency and Interest Rates Specialty Services.

Read the entire article =>>here

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