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Morici: Stronger Growth Needed to Sustain Bull Market

Imported oil and subsidized imports from China account for the entire trade gap. Development of new onshore reserves in the Lower 48, despite all the hype, has not delivered nearly enough new oil, and a full push on U.S. potential in the Gulf, off the Atlantic and Pacific coasts and in Alaska could cut U.S. imports in half, push U.S. growth well above 3% a year, and persistently push up U.S. stock prices.

The surge in natural gas production and accompanying lower prices substantially improves the international competitiveness of industries like petrochemicals, fertilizers, plastics, and primary metals -- and important new investments have been announced. Investment opportunities are beginning to surface to deploy natural gas in place of oil in rail and coastal water transportation.

However, the Department of Energy is reviewing licenses to boost exports of liquefied gas that would reduce the trade deficit and boost domestic demand, economic growth and corporate profits earned in the U.S. much less than keeping the gas at home to boost energy-intensive manufacturing and alternatives to gasoline in transportation.

To keep Chinese products artificially inexpensive on U.S. store shelves, Beijing undervalues the yuan through official intervention in currency markets and actions of state owned banks, which often evade calibration in their scope. Other Asian governments pursue similar strategies to stay competitive with the Middle Kingdom.

Economists across the ideological and political spectrum have offered strategies to offset the negative consequences of these mercantilist policies but the Obama Administration has refused to even acknowledge those options.

Cutting the trade deficit by $250 billion, through better domestic energy and trade policies, would ignite growth in the range of 5% a year -- comparable to the economic recovery of the Reagan years -- and fuel a bull market that would last until the end of the decade and take the Dow past 20,000.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

Professor Peter Morici, of the Robert H. Smith School of Business at the University of Maryland, is a recognized expert on economic policy and international economics. Prior to joining the university, he served as director of the Office of Economics at the U.S. International Trade Commission. He is the author of 18 books and monographs and has published widely in leading public policy and business journals, including the Harvard Business Review and Foreign Policy. Morici has lectured and offered executive programs at more than 100 institutions, including Columbia University, the Harvard Business School and Oxford University. His views are frequently featured on CNN, CBS, BBC, FOX, ABC, CNBC, NPR, NPB and national broadcast networks around the world.
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