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Real GDP growth averaged 3.48% per year from 1947 to 2000.
Starting in 2000, this long-term exponential trend began to fail. First the dotcom bubble popped, then came the housing bust. Let's take a close-up look at the most recent recovery for any signs of hope.
Click to enlarge.
From the bottom of the Great Recession, real GDP growth has averaged just 2.28%. That is an especially pathetic growth rate for at least five reasons.
1. "The worse a situation becomes the less it takes to turn it around, the bigger the upside." - George Soros (I think we can all agree that the situation qualified as much worse. So where is the bigger upside in response?)
2. The growth rate is a full 1.2% lower than the long-term average heading into 2000. This pig desperately needs lipstick in my opinion.
3. We can't blame any recessions for it being this low. There haven't been any recessions since the bottom! This data has been cherry picked to be recession free. Duh! I threw the optimists a bone here and it still came up way short! Seriously.
4. We're currently following the exponential growth trend line with great precision (r-squared = 0.988). The last time it failed, it failed to the downside. Historically speaking, recessions tend to do that. I know. Shocking.
5. How much will the 2.28% average drop once the next recession hits? In other words, what will the true growth rate be over a complete business cycle? 3.48%? I doubt it with every fiber of my being. I'd even be willing to leverage up that fiber with Super Colon Blow!
The January 20th cover of Time Magazine calls Janet Yellen the sixteen trillion dollar woman. That's a pretty amazing title and her picture definitely inspires confidence. She's going to need to work some magic to restore prosperity over the full business cycle though. I therefore offer her a musical tribute to help inspire. The monumental task before her is legendary.
In the dead of night
She'll come and take you away
Searing beams of light and thunder
Over blackened plains
She will find her way
She'll come and take you away
Searing beams of light and thunder
Over blackened plains
She will find her way
I can't speak for you, but I've got a really good feeling about this. Yes, very positive. Haven't been this optimistic in years. Why you ask? Her picture on the cover of Time is on a pitch black background ("over blackened plains she will find her way"). What could possibly go wrong?
See Also:
Sarcasm Disclaimer
Source Data:
St. Louis Fed: Real GDP
14 comments:
Don't believe my optimism?
I can certainly understand your skepticism. I've been known to use sarcasm like a crutch. Let me put it another way.
I have not been this excited about a Time Magazine cover since 2005!
Nostradamus offers this quatrain on Yellen:
The lover's heart is opened by furtive love
The woman ravished by floods of tears:
The lascivious will mimic
With moral indignation,
The father will twice do without the soul
Everyone knows when Nostradamus used the word "soul", he meant "real rate of return". No one is sure what "floods of tears" means, but it doesn't sound good.
Mr Slippery,
Everyone knows when Nostradamus used the word "soul", he meant "real rate of return".
SOUL - Savers Ominously Used by Lenders
I didn't intend to say that aloud! @#$%! I just summoned a @#$ @#$% motherf@#$ing banking demon from the motherf@#$ing Bancronomicon!
No one is sure what "floods of tears" means, but it doesn't sound good.
Yeah, well, everyone will know soon enough. I unleashed the motherf@#$ing banking beast on an unsuspecting world. @#$%!
I should never have bought that leather-bound book. It literally came with a free appendix, which was quite the shocker. Someone certainly paid a price for that.
I tried to return it but each time I did it would appear on my doorstep again along with a fresh new appendix. Just how many appendices does one book require?
It's kind of ironic when I think about it. The first chapter goes on and on about how we must all make sacrifices to save the banking system. That Bancronomicon, what a hoot! I laughed until my belly hurt (where my appendix used to be).
Actually, you don't even have to adjust for inflation. NGDP, the darling of market monetarists has been faltering since the Reagan administration, which to my mind is no coincidence at all.
As I opined here -
http://angrybearblog.com/2013/07/the-standard-deviation-of-ngdp-growth-since-1950.html#more-15694
Since 1980 there has been a choppy but relentless migration to lower and lower NGDP growth. We are now stuck in the worst recovery on record, and the lowest growth period ever to occur outside of a recession. In fact, NDGP growth is now lower than that which has occurred within most recessions.
I never got the appendices, but my reading of the Banconomicron suggests this:
http://angrybearblog.com/2012/01/where-has-all-money-gone-part-ii.html
Jazzbumpa,
We are now stuck in the worst recovery on record, and the lowest growth period ever to occur outside of a recession.
As the writer of the Illusion of Prosperity blog since 2007, I just have this to say.
1. Nobody could have seen it coming.
2. The future's so bright I gotta wear shades.
I use gallows sarcasm as a coping mechanism. Sigh.
"2. The growth rate is a full 1.2% lower than the long-term average heading into 2000.
This pig desperately needs lipstick in my opinion."
You mean like this......
http://blog.bea.gov/2013/07/23/gdp_changes/
- New Measures of Intellectual Property Products
- Improved Measures of Defined-Benefit Pensions
Like Ben, perhaps Yellen, has a Chopper full of lipstick,
or maybe a "Love Boat" full of Lipstick..... ;)
MisFit Kid
Need moar moniez.
http://research.stlouisfed.org/fred2/graph/?g=r7w
real per-capita wage income + debt take-out.
Alas, this graph is deceptive, due to Gini income disparity growing since 1990:
http://research.stlouisfed.org/fred2/graph/?g=r7x
CBO put out new projections last month for SS, and they're seeing 2.3% nominal wage base growth from here on out.
Well, they see 1.7% this year, 3.3%, 3.2% for the last two years of Obama and 4.7% for the first year of his successor, falling back to 1.5% in 2018 for some reason.
Another thing people aren't understanding is this brutal curve:
http://research.stlouisfed.org/fred2/graph/?g=r7z
real per-capita housing + health
throw in higher education:
http://research.stlouisfed.org/fred2/graph/?g=r7B
real per-student (age 18-22) higher education expenditure.
Up 6X since the 1970s!
(I was very lucky my education only tracked inflation in the late 80s).
Over in Japan, Abe has yet to do helicopter money, but that's the only thing that's going to save them from their debt-to-GDP burden.
Here, I don't know, since our population structure is actually more top-weighted.
Their dependency ratio is greater, but our growth in old people this decade and next is really going to stress the system.
Their baby boom has largely arrived into pension-age, while ours is just beginning, being age 50-68 this year.
We are now stuck in the worst recovery on record, and the lowest growth period ever to occur outside of a recession.
It's all the democrats fault.
We can vote our way out of this mess. Honestly.
Remember when you were young and you went to a scary movie and you had to keep telling yourself, "It's only a movie, it's only a movie."?
Well, take heart, and just keep telling yourself that, come 2016, "Rand Paul will not be bought and paid for, Rand Paul will not be bought and paid for."
Honestly.
MisFit Kid,
Like Ben, perhaps Yellen, has a Chopper full of lipstick,
or maybe a "Love Boat" full of Lipstick..... ;)
Nice, lol.
I don't know if we can afford an entire boat though, even if it is "exciting and new".
Can I interest you in a "Love Shack" instead? ;)
Hop in my Chrysler, it's as big as a whale and it's about to set sail
Troy,
Need moar moniez.
Another thing people aren't understanding is this brutal curve:
Love Shack, baby. Love Shack! ;)
Fritz_O,
We can vote our way out of this mess. Honestly.
Might even need to vote twice, just to ensure a clean path!
They always say that "the end" justifies "the mean."
Corruption in Kenya
It is estimated the average urban Kenyan pays 16 bribes per month.
Kenya needs to get with the program and hire some lobbyists as middlemen! There's no reason to have that many bribe transactions per month. Do them in bulk I say and outside of public view!
Lobbying. For what it's worth.
About $5B/year in the U.S. That's nationwide mind you, not just behind the closed doors of Washington D.C.
There are those on Wall Street who believe that without lobbyists the "system" grinds to a halt. Serious....ly.
Fritz_O,
$5B/year is just nature's way of making new friends.
"Hey, can you help me move this weekend?"
"I'm not sure. I might need to wash my hair."
"There's a billion dollars in it for you."
"Count me in, friend!"
Sigh.
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