Click to enlarge.
A picture's worth a thousand words.
Have no fear though! Ben Bernanke assures us that 2.9% to 3.6% real GDP growth is coming back in 2015. And let's not forget the 3.5% real yields that will no doubt come with it! Mark them on your calendar people! Good times ahead! Just need to keep pushing this wreck of a derailed economic train right back on the tracks. What could possibly go wrong?
This post is in response to every talking head on CNBC who tells me to keep a long-term perspective. Oh, yeah. I'm keeping a long-term perspective all right. Don't you worry about that, lol. Sigh.
Source Data:
St. Louis Fed: Real Gross Domestic Product
We have not seen 3% real GDP growth at any point in this "recovery", yet Bernanke assures us that we may get 3.6% in 2015?
ReplyDeleteIt's very surprising to me that Ben "There Is No Housing Bubble to Go Bust" Bernanke is so optimistic!
In all seriousness, this is what concerns me about the chart in this post most.
ReplyDeleteIt's a declining trend failing to the downside. That's the worst kind of failure. I'll be extremely surprised (pleasantly so) if we can even get back on the long-term declining trend.
There will be demographic effects as the baby boom teeters off into retirement.
ReplyDeleteMedicaid: $220B now, $430B in 2020. At $43k per job that's 10M healthcare jobs right there!
Which is interesting, as we only have 14M employed now:
http://research.stlouisfed.org/fred2/series/CES6562000101
Medicare, up to $860B in 2020, from $600B now.
$860B at $100,000 per job is 8.6M jobs.
We're going to have senior care jobs coming out of our asses!
http://www.cbo.gov/sites/default/files/cbofiles/attachments/44205_Medicare_0.pdf
SS is $660B this year and will be . . . $1T in 2020.
On our current employment base, $1T would be over $7000 per worker. SSA money is going to rain on the economy this decade and next -- the CBO table ends in 2023 at $1.2T, and the baby boom will be aged 59-77 that year, just hitting their prime.
Barring Congress deciding to turn off the party music, redistributive spending is coming.
Now, how to pay for this, that is the interesting question. I suspect we're moving into the Japanese regime . . .
http://research.stlouisfed.org/fred2/graph/?g=kHr
(I think I got the zeroes right with that)
Troy,
ReplyDeleteAt $43k per job that's 10M healthcare jobs right there!
Since healthcare adds to GDP, the sicker we all become, the more prosperous we will all be!
Now, how to pay for this, that is the interesting question...
We could sell all that newly generated prosperity to the highest bidder! ;)
It's the story of the broke-ass town waiting for a paying guest to arrive at the inn so everyone can pay their debts in turn with the new money injection.
ReplyDeletemore money in the paycheck economy will give us more growth.
what the baby boom retirement is going to give us is more consumers with more money to spend.
Monetarily, the senior spending spree is soon going to be of the same scale as the housing bubble, but it's going to be a sustained spending ramp for two or more decades.
Plus as the boomers pass on they will be imparting what savings they have (and let's not forget they hold the bulk of savings) to Gen Y.
Things are about to get weird here, in a good way if the boomers can retire and get replaced by Gen Yers looking for work.
Government operates on the skim, so the more active spenders, the larger the handle and the larger the rake.
Surely this nutty gridlock government can't last more than another 2+ years . . .
Troy,
ReplyDeleteMonetarily, the senior spending spree is soon going to be of the same scale as the housing bubble, but it's going to be a sustained spending ramp for two or more decades.
I can't speak for others, but I certainly didn't go on spending sprees when I retired.
When I was working, I ate at restaurants at least 3 times a week. Now, it's more like once a month.
Let's hope that I'm the exception and not the rule.
Troy,
ReplyDeletePlus as the boomers pass on they will be imparting what savings they have (and let's not forget they hold the bulk of savings) to Gen Y.
I would point out that there is tremendous savings inequality though. I'm not sure the median baby boomer will be passing down much at all.
There's probably a reason I'm seeing so many reverse mortgage ads on TV.
In any event, I think these dynamics will keep real interest rates and real GDP growth low (just like Japan).
Just a thought.
Weird may very well be a good word to describe what happens. There are plenty of forces in play and my crystal ball is plenty cloudy.
If I knew exactly what was going to happen then I wouldn't own TIPS and I-Bonds. I'd be the host of Super Mad Money and I'd spray random advice 10x faster than Cramer, lol.
Social security tho has the signal benefit that you can't get fired from it. If you can open a bank account, you can get paid every month.
ReplyDelete(Sadly, all other pensions are not so secure)
Per CBO's May estimate, Social security retirees are going to go from 38M now to 50M by 2020.
12M more checks hitting the economy each month. The baby boom has been stashing that money away since the 1960s and it's about to be spent!
The real question the economy is going to be asked is if the retirees are going to be replaced with move-up hiring, or will we just get higher productivity from the existing workforce to replace the departed.
$1T in SSA outgo would support 20M jobs at $50,000 per.
The other unknown though is if cost inflation arises without concomitant wage inflation. That would be very bad for these SSA payouts.
"Boomers spending." Classic economist mistake extrapolating what happened when the depression era babies retired with fat defined pensions etc, and thinking the asset striped boomers are going to act the same way. Not.
ReplyDeleteIn Bernanke's last testimony and the S&P 500 agrees, this marks the 57th time since 2009 that the recovery is welcoming you to itself as it's always just around the corner! Enjoy it and buy Tesla!
ReplyDeletehere's a new chart:
ReplyDeletehttp://research.stlouisfed.org/fred2/graph/?g=kJ1
real YOY mortgage borrowing per housing start, or
"the moral is to the physical as three is to one"
Rob Dawg,
ReplyDelete"Boomers spending."
This dog don't hunt. ;)
GYSC,
ReplyDeleteAlways just around the corner indeed!
As a joke, I did this to my girlfriend last night. I was just around the corner when she exited the bathroom.
"Boo!"
Hahaha!
Life is full of surprises to those who expect good things just around the corner. ;)
Troy,
ReplyDelete"the moral is to the physical as three is to one"
The beatings will continue until the "moral" improves?
Can't resist a pun! ;)