Wednesday, May 9, 2012

Not Living Up to Our Reduced Potential

Click to enlarge.

Start with bad news. It would seem that potential GDP growth will not be what it once was. Big shocker. Perhaps someone could kindly share this chart with Jeremy Siegel. His belief that 100+ years of economic history can simply be extrapolated into the distant future may need a revision or two.

Click to enlarge.

Tack on some more bad news. It would seem that we're having difficulty living up to the drastically reduced target. Oh oh.

Cramer was on CNBC today telling us that panic is not a strategy. Really? I've been a believer that few lost their fortunes being among the first to panic. Further, it has been an extremely effective strategy over the past decade. Just ask Winners of the New World and Lenny Dykstra investors.

Myth Busters

As long as I can remember I’ve been told that horses, after being rescued from a burning barn will run back inside in a state of panic, or even refuse to leave the barn at all. Although it didn’t make much sense, I’d had no reason to doubt this “fact” until this afternoon...

They became very upset when the gentle breeze from the north became a gentle breeze from the east, blowing smoke from the burning barrel directly into the barn....

They made it clear they wanted to leave the now smoke filled barn at once....

The last horse to be turned out, a fat greedy young mare, was so involved with her “free food“ in the manger that she barely noticed that she was alone in the barn.

I think we can all learn a valuable life lesson from this. Smoke is no reason to panic when "free lunches" are being served, especially if one is fat and greedy.

Source Data:
St. Louis Fed: Potential GDP
St. Louis Fed: GDP


Mr Slippery said...

Two words: Clown. Horn.

I had an interesting chat with one a dude today who swears he has figured out the inside rules of Wall*Street and knows exactly how the stock market will move. He has been trying to be a full time trader for two years without success, but he blames it on poor execution, which is kind of critical if you want to be a trader.

After the discussion, we both agreed that I don't have the mind set to be a trader. Fortunately, I don't need the stock "market" to prosper.

Stagflationary Mark said...

Mr Slippery,

It never gets old.

Fatboy said...

Did the horse get burned up?

Stagflationary Mark said...


No animals were harmed in the making of this post.

Had there been an actual barn fire, trained stunt economists would have been used in their place.

mab said...

Not living up to our reduced potential??? Nice!

I'm not sure what's more idiotic, over-charging people for a house or for a college education. Sadly, we'll find out soon enough.

Stagflationary Mark said...


I'm not sure what's more idiotic, over-charging people for a house or for a college education.

Must we choose?

Why not offer a person a NINJA loan to pay for college *and* then offer that same person a NINJA loan to buy a house once he/she graduates?

Why isn't there a late night infomercial for this?!? That's two mirror foggings for the price of two!

The NINJA Debt Maximizer™

Buy one thing you can't afford at a very high price and get a second one you can't afford for twice the price!

Just pay separate processing and handling.

mab said...

Must we choose?

We don't get to choose, but thankfully the wise beard sage at the Fed does.

All I can say is that the Fed gives us more than we can bargain for.

Do we have inflation? Yep, "officially" 2%/year give or take a little.

Do we have deflation? Yep, house prices are down 35% over the last five years.

And thanks to falling house prices, millions have less than $3000 in assets and apparently now qualify for food stamps.

Win, win, win, win, win win, win! Everybody gets a trophy!

WV is "rusedid".

Stagflationary Mark said...


All I can say is that the Fed gives us more than we can bargain for.

Roscoe's Rug Emporium