Five reasons for economic optimism

While economic conditions around the world continue to deteriorate, there are signs of hope.

The bank recovery plan in the US has sparked a sharemarket rally that has continued in Australia, while NAB chief executive Cameron Clyne has commented that the drop in conditions is “relatively close to the bottom”.

While a full recovery may not occur for up to a year, here are five signs to be optimistic about the future of the economy, courtesy of Time.com.

Shares are no longer overpriced. The financial crisis has brought the Dow average in the US and the ASX200 down a large amount, but it means shares both home and abroad are cheap. While they could continue to drop in value, the chances of positive asset returns in the future are now much greater than before.

Government reaction. Governments across the world are making attempts to stimulate the economy and help purge financial institutions of toxic assets in the US. While not every move can necessarily be the right one, none have certainly made the economy worse than it already is.

Lower spending. Consumers are pulling back on credit card debt and saving up for the future. While retailers and other businesses may be struggling, moderate spending in the meantime leaves room for spending increases in the future.

The United States. While a complete collapse of the American economy may have been a topic of conversation in September, the latest developments have ruled that out completely. The American dollar as the world’s reserve currency aas ensured the US will remain a leading nation in the global economy for some time – which is good for everyone.

There is no fifth reason. Time’s Justin Fox admits that the first four reasons are just finding silver lining, or “wishful thinking”, but that not all hope is lost. “It is, of course, exactly when the news is most discouraging and sentiment most gloomy that recoveries begin,” he says.