The cover story of BusinessWeek has one of the most fascinating articles I have seen in a long time. The article makes a case that the very measurements of our economy are no longer capable of capturing the most accurate picture of strength or weakness.
For example, if a leading US corporation opens a software design center in India, the knowledge of how to run design centers efficiently, and how to monetize the R&D produced, also flows to India as an export from the US. This intangible knowledge is not captured in any data, but is critical to achieving a high return on the investment of the design center, and is not something India could have produced indiginously.
Or, if an engineer with a bachelor's degree immigrates to the US, the US has essentially received an engineer for free. The cost of educating this engineer through school and college in the US might have been $200,000 or more, yet these costs are not incurred by the US, even as this engineer come in ready to contribute to the economy right away.
These intangibles partly explain why the trade deficit and low savings rate have not managed to drag the US economy into recession all even after these years, and why knowledge creation is valued so highly by the stock market. The combined revenue of Google, eBay, and Yahoo! is only $16 Billion, yet their combined market cap is $220 Billion, even in these cautious post-bubble times.
People who suffer from Bush Derangement Syndrome are utterly convinced that the economy is in terrible shape, insisting that unemployment is underreported, that twin deficits will sink us, that only low-paying jobs are being created, while only the rich get richer. However, while even the traditional data shows the current economy to be one that is moderately strong, this new paradigm portrays the current economy on even stronger footing than previously recorded. Irrationally pessimistic people are subconsciously preventing their own success in this economy, by failing to take risks or pursue the opportunities that surround them.