The "Last Optimist Standing"

In a recent presentation given during the Wharton School’s Global Alumni Forum, professor and author Jeremy Siegel said that generous unemployment benefits may be inflating the U.S.’s unemployment rate, and that factors like innovation and productivity will spur the country’s growth.

According to Wharton’s web site, Siegel said that Congress “has voted the most generous unemployment benefits, by a factor of four to five, than ever before in past recession.” In fact, he says some studies suggest that these generous benefits are responsible for up to 2 percentage points of the current unemployment rate. He thinks unemployment will drop to 9% by year-end, and to about 7% by the end of 2011.

Siegel, who said he sometimes feels like the “last optimist standing” among economic forecasters, also said that high inflation — which many expect the U.S. will see — isn’t good for stocks. “In the long run, though,” he added, “stocks are a good hedge against inflation because they are based on real assets — on land, capital, ideas, etc., which tend to rise with the price level.”

Siegel also said he sees GDP growing at a 4% pace in the second half of 2010, and said productivity, “including rates of innovation, invention, discovery, how to produce more with less, how we learn to do things better” — will be the main source of long-term growth. “People ask where demand will come from,” he said. “Demand always comes from new products. … Productivity growth will be key to the global economy going forward. That growth benefits all countries.”

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