{"id":1123676,"date":"2019-06-27T21:18:14","date_gmt":"2019-06-27T21:18:14","guid":{"rendered":"https:\/\/dailyreckoning.com\/?p=107572"},"modified":"2019-06-27T21:18:14","modified_gmt":"2019-06-27T21:18:14","slug":"gdp-the-new-slow-normal","status":"publish","type":"post","link":"https:\/\/juniorminingnews.com\/?p=1123676","title":{"rendered":"GDP: The New \u201cSlow\u201d Normal"},"content":{"rendered":"

This post GDP: The New \u201cSlow\u201d Normal<\/a> appeared first on Daily Reckoning<\/a>.<\/p>\n

\u201cIs Slow Still the New Normal for GDP Growth?\u201d<\/p>\n

The Federal Reserve Bank of San Francisco raises the question\u2026 and proceeds to answer it:<\/p>\n

\n

Estimates suggest the new normal pace for U.S. GDP growth remains between 1.5% and 1.75%, noticeably slower than the typical pace since World War II…<\/em><\/p>\n

A larger challenge is productivity. Achieving GDP growth consistently above 1.75% will require much faster productivity growth than the United States has typically experienced since the 1970s.<\/em><\/p>\n<\/blockquote>\n

Productivity \u2014 as we have argued prior \u2014 is the spring of enduring prosperity.<\/p>\n

Productivity growth transformed these United States from a bucktoothed backwater into a global behemoth\u2026 a modern Colossus bestride the world.<\/p>\n

Productivity growth averaged 4\u20136% for the 30 years post-WWII. But after 1980?<\/p>\n

Average productivity has languished between 0\u20132%.<\/p>\n

Meantime, labor productivity averaged 3.2% annual growth from World War II to the end of the 20th century.<\/p>\n

But since 2011\u2026 a mere 0.7%.<\/p>\n

What might account for America\u2019s declining productivity growth?<\/p>\n

We have previously implicated Richard Nixon and his 1971 murdering of the gold standard.<\/p>\n

The gold standard, though a sad caricature in its dying days, nonetheless enforced an honesty.<\/p>\n

A wastrel nation that consumed more than it produced would eventually run through its gold stocks.<\/p>\n

The fiat dollar, the unbacked dollar, lifted the penalty.<\/p>\n

A liberated Federal Reserve finally broke loose from its golden shackles\u2026 spread its nets\u2026 and ensnared the nation in debt.<\/p>\n

Michael Lebowitz of Real Investment Advice:<\/p>\n

\n

The stagnation of productivity growth started in the early 1970s. To be precise it was the result, in part, of the removal of the gold standard and the resulting freedom the Fed was granted to foster more debt\u2026 Over the last 30 years the economy has relied more upon debt growth and less on productivity to generate economic activity.<\/em><\/p>\n<\/blockquote>\n

\u201cUnfortunately, productivity requires work, time and sacrifice,\u201d he adds.<\/p>\n

But the emerging American economy left behind the grimy toil of the factory floor and the workbench\u2026. and headed for Wall Street.<\/p>\n

It went chasing after the fast buck \u2014 the easy buck.<\/p>\n

The financialization of the American economy was underway.<\/p>\n

Ten percent of GDP in 1970, the finance industry grew to 20% of GDP by 2010\u2026 like weeds in an abandoned factory.<\/p>\n

And like spreading weeds, finance choked the path of labor…<\/p>\n

The bottom 90% of American earners advanced steadily from the early 1940s through the early 1970s.<\/p>\n

But they\u2019ve been sliding back ever since \u2014 or held even at best.<\/p>\n

In contrast we find the top 1% of earners\u2026<\/p>\n

From 1920 to the early 1970s they lost ground to the bottom 90%.<\/p>\n

But beginning around 1980 they went leaping ahead\u2026 and began showing society their dust:<\/p>\n

\"Read<\/p>\n

But perhaps we can declare the race a wash.<\/p>\n

Labor\u2019s loss is simply capital\u2019s gain. And the economy as a whole comes out even. Perhaps the transaction even benefits it.<\/p>\n

But has it? Has the United States economy benefited from financialization?<\/p>\n

The facts may run precisely the other way\u2026<\/p>\n

Economists Gerald Epstein and Juan Antonio Montecino slaved over the numbers.<\/p>\n

Since 1990, they conclude…<\/p>\n

The financial sector has drained as much as $22 trillion from the United States economy:<\/p>\n

\n

What has this flawed financial system cost the U.S. economy?… We estimate these costs by analyzing three components: (1) rents, or excess profits; (2) misallocation costs, or the price of diverting resources away from nonfinancial activities and (3) crisis costs, meaning the cost of the 2008 financial crisis. Adding these together, we estimate that the financial system will impose an excess cost of as much as <\/em>$22.7 trillion<\/em><\/strong> between 1990 and 2023, making finance in its current form a net drag on the American economy.<\/em><\/p>\n<\/blockquote>\n

Meantime, we sag and groan under majestic mountains of debt.<\/p>\n

A financialized economy demands perpetually increasing credit \u2014 debt, that is \u2014 to keep the show going.<\/p>\n

Servicing that debt absorbs increasing amounts of society\u2019s income. That in turn leaves less to save… and to invest in productive assets.<\/p>\n

It is a dreadful cycle.<\/p>\n

Eventually it leaves the cupboards bare\u2026 and the future empty.<\/p>\n

Average real annual economic growth since 2009 runs to 2.23%.<\/p>\n

Compare the past decade\u2019s 2.23% with the larger 3.22% trend since 1980.<\/p>\n

One percentage point may seem a trifle. And one year to the next it is.<\/p>\n

But Jim Rickards calculates the United States would be $4 trillion richer \u2014 had the 3.22% trend held this decade.<\/p>\n

Run it 30, 50, 60 years… Jim concludes the nation would be twice as rich over a lifetime.<\/p>\n

Here is Lebowitz with the sting in the tail:<\/p>\n

\u201cGiven the finite ability to service debt outstanding\u2026 future economic growth, if we are to have it, will need to be based largely on gains in productivity.\u201d<\/p>\n

But from where?<\/p>\n

Below, George Gilder shows you how real money could \u201cwork miracles of growth.\u201d Read on.<\/p>\n

Regards,<\/p>\n

Brian Maher
\nManaging editor, The Daily Reckoning<\/em><\/p>\n

The post GDP: The New \u201cSlow\u201d Normal<\/a> appeared first on Daily Reckoning<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":"

This post GDP: The New “Slow” Normal<\/a> appeared first on Daily Reckoning<\/a>.<\/p>\n

Economic growth requires dramatic increases productivity… The economy would be how much richer without the financial sector?… <\/p>\n

The post GDP: The New “Slow” Normal<\/a> appeared first on Daily Reckoning<\/a>.<\/p>\n","protected":false},"author":16,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"site-sidebar-layout":"default","site-content-layout":"","ast-site-content-layout":"","site-content-style":"default","site-sidebar-style":"default","ast-global-header-display":"","ast-banner-title-visibility":"","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"","ast-breadcrumbs-content":"","ast-featured-img":"","footer-sml-layout":"","theme-transparent-header-meta":"","adv-header-id-meta":"","stick-header-meta":"","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":"","astra-migrate-meta-layouts":"default","ast-page-background-enabled":"default","ast-page-background-meta":{"desktop":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""},"tablet":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""},"mobile":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""}},"ast-content-background-meta":{"desktop":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""},"tablet":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""},"mobile":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""}},"footnotes":""},"categories":[484,366,1217,463],"tags":[],"_links":{"self":[{"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=\/wp\/v2\/posts\/1123676"}],"collection":[{"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=\/wp\/v2\/users\/16"}],"replies":[{"embeddable":true,"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=1123676"}],"version-history":[{"count":1,"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=\/wp\/v2\/posts\/1123676\/revisions"}],"predecessor-version":[{"id":1123677,"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=\/wp\/v2\/posts\/1123676\/revisions\/1123677"}],"wp:attachment":[{"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=1123676"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=1123676"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=1123676"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}