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Author: yodaorange Big red star, 1000 posts Feste Award Nominee! Feste Award Winner! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 458907  
Subject: Can Washington improve GDP growth? Date: 11/15/2012 9:59 PM
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Pretty much everyone agrees that GDP growth is vital for the US to restore fiscal balance and job creation. Both political parties claim to have the best formula to increase the growth rate. Washington plans to bridge the gap between taxes collected and spending mainly through growth. We have all heard the phrase “we will grow ourselves out of it.” The other options of cutting spending and/or raising taxes seem unattainable.

What happens if Washington is NOT able to find the magic formula to improve the growth rate? Maybe they have lost the key to the safe containing GDP growth pixie dust. Over estimating long term growth has been standard operating procedure for both parties for many decades. The current White House and CBO projections are for 4% GDP growth in 2014 through 2017. Recent GDP growth has been coming in at less than 2.0%.

Ed Easterling wrote about GDP growth and the consequences for investment returns in his book Probable Outcomes. [1] Ed showed that GDP averaged 3.3% from 1900 through 2009, but has slowed to 1.9% in the 2000’s. Ed posed the question whether this was a onetime drop or if it was the new norm.

Rob Arnott’s firm, Research Affiliates, released a white paper today entitled 1% . . . The New Normal Growth Rate? [2] As the title implies, the paper suggests that the long term US growth rate might have dropped down to 1%, which is quite a change from either 3.3% or 4.0%. Research Affiliates has published several papers in this area the last few years, so this paper is essentially the latest in a series.

They detail three factors for lower GDP growth:

1. Population Growth. The model that economists use assumes the more people you have, the higher the GDP in nominal terms. This is certainly true if a country can maintain the GDP per capita while adding more people. I am skeptical if this is still a valid assumption, but will ignore it for know. Both fertility and immigration have been dropping in recent years. The paper claims we will be hard pressed to break 0.8% population growth for the next two decades.

2. Employment Rate which I assume everyone is familiar with. This is the percentage of Americans over 16 that are working. It rose dramatically from 1950 through 2000 in large part because more women entered the work force. As people leave the work force for whatever reason, primarily an inability to find a job or retirement, the percentage drops. The rate peaked at 67.3% in 2000 and currently stands at 63.8%. It is important to note that demographics will cause this ratio to drop as more boomers retire. It is baked into the cake, unless boomers all of a sudden decide NOT to retire.

3. Productivity growth is the unit output you can get from one worker. It is one of the keys to improving living standards for a society. A great example is farming, where one farmer today produces more food than 100 farmers did a century ago. Same thing for many factories with increased automation. Not to mention computers. Once again demographics is working against us. As we age, our contribution to GDP growth declines. It goes to the point that retirees actually cause negative GDP growth.

Rather than list all kinds of tables and numbers, I suggest you read the paper if you are interested. They combine all of these factors together and argue that we are heading for 1.0% GDP growth over the next few decades. Despite what you hear coming out of Washington, it is not clear they can make a substantial difference to the long term growth rates. If you don’t believe that, you need to explain how Washington is going to undo the negative effects of retiring boomers. Somehow I don’t think running with a platform of “We will NEVER let seniors retire” is a winning strategy.

BOTTOM LINE if the 1.0% GDP growth comes true, it will profoundly affect investments in a negative way. Real returns from both equities and fixed income will be lower. Stated differently, all else being equal, you want to invest in faster growing countries. Unfortunately, the US probably will not be part of the fast growth club for the foreseeable future.

Pretty darned important investing implications, so I suggest you at least skim over the 6 page whitepaper.

Thanks,

Yodaorange



[1] Ed Easterling book : Probably Outcomes
http://www.amazon.com/Probable-Outcomes-Ed-Easterling/dp/187...


[2] Research Affiliates paper: 1% . . . The New Normal Growth Rate?
http://researchaffiliates.com/ideas/pdf/fundamentals/Fundame...
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Author: jerryab Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 408672 of 458907
Subject: Re: Can Washington improve GDP growth? Date: 11/16/2012 12:46 AM
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This is nothing new, and I believe has been discussed previously on this board.

The only thing that moves the US economy significantly is new technology that makes things more efficient.

Telephone/fax/e-mail/wireless phones/Internet.

Computers--especially the desktop computer and networking.

New materials and manufacturing--whether done in the US or elsewhere.

The much-higher growth rate outside the US is not a surprise. That is because those economies are able to leapfrog a wide variety of early "learning" stuff (i.e. massive wired telephone systems) and jump straight to wireless due to a variety of reasons (distances, population density, geography, etc). So they saved the cost of all the previous investment and can now invest *more* in other things because of that avoided cost.

GDP is, IMO, becoming less relevant. Once there is "enough", are more needed? The are "enough" workers to produce the stuff we want. In fact, there are more than enough. We live in a consumption economy. Acquiring "stuff" is the name of the economic game today. Acquiring necessities is reasonable. But once those basic needs are more-than-adequately met, what next? Therein lies the problem.

And there is no way to measure that in terms of GDP. Think about it. In the Star Trek universe, they do not use or have money. You own your own things, but that is about all. How do you measure their GDP? What is "of value"? Things they personally made/earned/received/found/valued. And that "value" is personal, not necessarily intrinsic.

A housewife today is *not* "valued* economically--but is what she does "of value"? Yet it is not counted in the GDP. So, what GDP counts is what money values. When something can not be valued with money, how do you count it toward GDP?

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Author: WendyBG Big gold star, 5000 posts Top Favorite Fools Top Recommended Fools Feste Award Winner! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 408673 of 458907
Subject: Re: Can Washington improve GDP growth? Date: 11/16/2012 12:47 AM
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<Stated differently, all else being equal, you want to invest in faster growing countries. >

Thank you for sharing these valuable insights.

I have looked at faster-growing countries, but the risks are high. Many (if not all) of these countries have problematic histories of political instability (including currency failure and debt default) that has led to instability in the fairly recent past and very high stock market volatility.

Every time I look at international stock funds, I get the same feeling that I do when I look at hormone replacement therapy -- great potential but also potentially dangerous side effects (blood clots, etc.) with unpredictable risk.

Please share your specific recommendations of where to invest and how to mitigate the risks.

Thanks,
Wendy

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Author: DrBob2 Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 408687 of 458907
Subject: Re: Can Washington improve GDP growth? Date: 11/16/2012 8:52 AM
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Ed Easterling wrote about GDP growth and the consequences for investment returns in his book Probable Outcomes. [1] Ed showed that GDP averaged 3.3% from 1900 through 2009, but has slowed to 1.9% in the 2000’s. Ed posed the question whether this was a onetime drop or if it was the new norm.

Not clear there was a drop. Using BEA and Census data, the growth rate of GDP/capita:

1950 to 1964 2.1%
1964 to 1972 2.9%
1972 to 1987 2.1%
1987 to 2006 1.9%

Aside from a brief increase in growth rates in the period 1964 to 1972 (eight years) there was exceedingly little change in per capita growth rates since 1950.

DB2

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Author: DrBob2 Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 408688 of 458907
Subject: Re: Can Washington improve GDP growth? Date: 11/16/2012 8:56 AM
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Stated differently, all else being equal, you want to invest in faster growing countries.

I've read studies that it pays in invest in the cheaper ones. I think it comes down to the old 'growth versus value' investing question.

DB2

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Author: tjscott0 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 408690 of 458907
Subject: Re: Can Washington improve GDP growth? Date: 11/16/2012 9:44 AM
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This article suggests its near demographically impossible for the Fed to improve GDP growth.

http://www.businessweek.com/articles/2012-11-15/aging-boomer...

John Rodwick scrimps and saves so he can spend on his seven grandchildren and cruise around the Rocky Mountains with his wife, Jean, in their motor home. “My wife and I love to travel, so that is our one big expense, but we are very, very conservative” otherwise, says the 72-year-old former business professor. The couple doesn’t go to hotels or restaurants: They cook and sleep in their 19-foot, blue-trimmed Roadtrek. With the value of their home dropping 30 percent in the past six years, the Rodwicks have become “very cost-conscious.”

Federal Reserve officials say they are concerned that retirees like the Rodwicks are making it harder for the central bank to create more jobs for those still working. Older people are more likely to avoid purchases of houses, cars, and other pricey items that the Fed is trying to encourage with record-low interest rates. Their growing numbers are making the Fed’s job even harder.

“Spending decisions of the older age cohorts are less likely to be easily stimulated by monetary policy,” said William Dudley, president of the Federal Reserve Bank of New York, in a speech on Oct. 15.


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Author: rubberthinking Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 408691 of 458907
Subject: Re: Can Washington improve GDP growth? Date: 11/16/2012 9:55 AM
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Federal Reserve officials say they are concerned that retirees like the Rodwicks are making it harder for the central bank to create more jobs for those still working. Older people are more likely to avoid purchases of houses, cars, and other pricey items that the Fed is trying to encourage with record-low interest rates. Their growing numbers are making the Fed’s job even harder.

“Spending decisions of the older age cohorts are less likely to be easily stimulated by monetary policy,” said William Dudley, president of the Federal Reserve Bank of New York, in a speech on Oct. 15.

the Bull meter is going off like a wombat out of hell.......I could careless about older people saving money as if the economy only depends on that....the next generation of serfs needs money.....not the next generation of crazy little suited bankers.......

Dave

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Author: tjscott0 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 408692 of 458907
Subject: Re: Can Washington improve GDP growth? Date: 11/16/2012 10:15 AM
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the Bull meter is going off like a wombat out of hell.......I could careless about older people saving money as if the economy only depends on that....the next generation of serfs needs money.....not the next generation of crazy little suited bankers.......

Dave


I think you missed the point. Its not about them saving money but stimulating them to SPEND money to create jobs & sales/profit to rise the GDP. Low income via low interest rates mean they feel poor & won't SPEND.

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Author: tim443 Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 408693 of 458907
Subject: Re: Can Washington improve GDP growth? Date: 11/16/2012 10:22 AM
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.....not the next generation of crazy little suited bankers.......

Dave



Ask and yea shall receive?

In truth I don't think it took a rocket scientist to figure out that particularly older people are watching their pennies (or in the case of Canuck nickels)?

I still see the under 50s running up the tab on those cheap rates, many appear to be ignoring the warnings from the BoC governor and the finance minister. Housing market generally is still slowly growing though Toronto and Vancouver has some actual decline while Edmonton and Calgary is still doing well.

I've always thought the massive oversized (in many countries) financial industry was ripe for a whole lot of pruning.


Tim

http://www.bnn.ca/News/2012/11/16/Banks-may-shrink-for-good-...

Banks may shrink for good as layoffs near 160,000

Reuters
8:10 AM, E.T. | November 16, 2012
Financials

Major banks have announced some 160,000 job cuts since early last year and with more layoffs to come as the industry restructures, many will leave the shrinking sector for good as redundancies outpace new hires by roughly two-to-one.

A Reuters analysis of job cuts announced by 29 major banks showed the layoffs were much bigger in Europe than in Asia or the United States. That is a particular blow to Britain where the finance industry makes up roughly 10 percent of the economy.

The tally of nearly 160,000 job cut plans, meanwhile, is likely to be a conservative estimate as smaller banks and brokers are also cutting staff or shutting up shop, and bigger banks have not always disclosed target numbers of layoffs.

....

Well-paid investment bankers are bearing the brunt of cost cuts as deals dry up and trading income falls. That is particularly the case in some activities such as stock trading, where low volumes and thin margins are squeezing banks.

"When I let go tons of people in cash equities this year, I knew most would be finished in this business. It is pretty dead. Some will just have to find something completely different to do," said one top executive at an international bank in London, on condition of anonymity.

The job cuts eat into tax revenues usually reaped from the sector at a time when the global economic recovery is slowing.



Speaking of Edmonton this is interesting. I've spent some time in Edmonton and can certainly see where there might be a problem.

The British MoD once sent a couple of their eggheads to Ottawa to test our military arctic clothing. Some genius thought it would be a great idea to send them on the very Arctic survival course I was on in February 1972 in Resolute Bay NWT. One of them had to be evacuated when the temperature got to -72F and the igloo got a little to tight for the old fellow used to a relatively mild climate.


$10M grant not enough for ‘rock star’ scientist to brave Edmonton’s winters
.
.By Matthew Coutts | Daily Brew – 20 hours ago

...

The same sentiment was expressed recently by Patrik Rorsman, a celebrated European scientist who was lured to the University of Alberta by a $10 million research grant.

"It is quite a nice place, they have ambitions for their city and the university is also ambitious, but they suffer from the climate," Rorsman told the National Post.

[ More: Tourism Victoria ads greet chilly Edmonton bus riders ]

Rorsman was one of 19 foreign scientists lured to Canadian universities two years ago as part of a federal strategy to attract "rock star" scientists.

After seven months in Edmonton, Rorseman resigned from the Canada Excellence Research Chair, turned his back on the $10 million grant and returned to England.


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Author: jgc123 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 408696 of 458907
Subject: Re: Can Washington improve GDP growth? Date: 11/16/2012 10:41 AM
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I am inclined to believe that you really can't force baby boomers to spend but so much and I base that on both studies and an honest look at myself. At 56 with more earnings behind me than ahead, low interest rates incent me to pay off debts to zero and save in anticipation of higher rates and inflation, and high interest rates incent me to pay off debts and save, and uncertainty incents me to pay off debts and save. As one ages, one gets more conservative in approach.

I do think the deflationary pressures are persisting in the face of huge stimulus and will likely get worse as stimulus gets less and less effective and as deficit reduction measures are forced upon us.

My only substantive change in the last five years is a move out of the smaller S/P stocks and into energy and multinationals.

I have been reading recently about how some of the multinationals are already planning to pull factories out of China and preparing to put them in parts of Viet Nam where they can get cheaper labor - just like they pulled out of unionized states 30-40 years ago, and then out of nonunion states and into China, Pakistan, etc., after that.

I may not like it for personal political reasons, but if the multinationals can leave the U.S. for cheap labor and easy environmental restrictions in China, they can do the same thing to China for the next 10 or 15 years while they prepare for the next target after that.

So when the bottom falls out (maybe now?) my next batch of savings will be weighted toward energy and multinationals.

If you can't beat 'em.....

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Author: EddieLuck Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 408702 of 458907
Subject: Re: Can Washington improve GDP growth? Date: 11/16/2012 11:17 AM
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From Ron Paul's farewell speech, the saddest thing I have read for years:

<<I have come to one firm conviction after these many years of trying to figure out “the plain truth of things.” The best chance for achieving peace and prosperity, for the maximum number of people world-wide, is to pursue the cause of LIBERTY.>>

He is of course right as usual. All the endless discussion of why China has grown so fast, and what tax or money policies would continue the boom there, are so much twaddle. The boom happened because they increased freedom in China, which allowed people to use their talents to greater advantage.

The same applies here. The American success story came mostly from the higher degree of freedom which existed for a long time in the US. As laws proliferate here and throughout the developed world, peace and prosperity suffer and our economy gets more geriatric.

It really is as simple as that. One should be very hesitant to make a new law. One per year might be a good rate of legislation, instead of several per day like we have now.

We just don't need 70-odd thousand pages of laws or 70-odd thousand pages in the tax code. A legal web of restrictions like that is the road to ruin because everything gets entangled in the web and innovation gets to be like swimming through molasses. The first thing an entrepreneur has to do is hire a lawyer to find out what all the laws are that apply to his intended enterprise. The second is to spend all the money required to comply with them.

I would vote for any candidate who vowed to do nothing but work on cancelling laws in a deliberate and careful way. This is not to say that laws are bad. Just that they must be very, very carefully considered and refined and simplified before being enacted. The great innovative genius, Genghis Khan, who created the world's largest and longest-surviving empire up to that time, is said to have insisted on cancelling old laws before making new ones so that there could not be more laws than a man can remember. I think he set the limit at 21 laws. Some of his laws enforced freedoms rather than restricting them, for instance the freedom to travel without being robbed, stopped, or taxed along the way. He was a man who understood economics very well and brought peace and prosperity to his dominions in a way that had not been previously experienced in this world.

Ed.

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Author: notehound Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 408708 of 458907
Subject: Re: Can Washington improve GDP growth? Date: 11/16/2012 11:50 AM
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I would vote for any candidate who vowed to do nothing but work on cancelling laws in a deliberate and careful way. This is not to say that laws are bad. Just that they must be very, very carefully considered and refined and simplified before being enacted. The great innovative genius, Genghis Khan, who created the world's largest and longest-surviving empire up to that time, is said to have insisted on cancelling old laws before making new ones so that there could not be more laws than a man can remember. [Emphasis added.]

Old Genghis was smarter than today's policy makers.

Sometimes I just look at the 10 Commandments and I think that we really don't need more than that, maybe adding an 11th: "Do unto others as you would have them do unto you."

;-)

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Author: warrl Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 408726 of 458907
Subject: Re: Can Washington improve GDP growth? Date: 11/16/2012 4:10 PM
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Stated differently, all else being equal, you want to invest in faster growing countries.

I've read studies that it pays in invest in the cheaper ones. I think it comes down to the old 'growth versus value' investing question.


I've heard the two standard dichotomies relabeled as follows:

Growth: exciting companies
Value: boring companies

Large-cap: companies everyone knows about
Small-cap: companies most people have never heard of

And over the long term, the people who make the most money in the stock market are those who invest in boring companies most people have never heard of.

(I think of it this way: if you're betting on waves and tides, sometimes you'll be in the water and sometimes you'll be hung out to dry. If you bet on the depths, you stay wet.)

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Author: OrmontUS Big gold star, 5000 posts Feste Award Nominee! Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 408739 of 458907
Subject: Re: Can Washington improve GDP growth? Date: 11/16/2012 8:24 PM
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If you project based on Yoda's reflections, there is a possibility (especially in the near/medium future considering current and likely global events) that the US dollar will move higher (unfortunately, the US stock market would drift in the opposite direction). In this event, it is also likely that foreign emerging economies (and even Europe) will decrease even faster.

We would then have companies showing better value outside of the US at the same time that the stronger USD allows us to purchase even more bang for the buck.

While predicting the future is difficult, there are two components to this strategy. The first is to have enough dry powder that you don't get mauled too badly as the USD rises (and the equity market drops) and can redeploy enough at a later time to make a long term difference when things settle down again. The second is a willingness to deploy when the time is right, rather than act like a deer in the headlights.

With recent selling sprees, I am currently about 11% of assets in equities. If I've guessed wrong, I may miss a bit of opportunity (and can always buy them back). If everything goes into the crapper between now and the end of February, I can always buy "something" back, but it will probably be more heavily weighted towards foreign shares (either/both specific issues and mutual funds such as VWO).

No reason to panic, just an organized withdrawal for now.

Jeff

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Author: MadCapitalist Big funky green star, 20000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 408751 of 458907
Subject: Re: Can Washington improve GDP growth? Date: 11/16/2012 10:05 PM
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I would vote for any candidate who vowed to do nothing but work on cancelling laws in a deliberate and careful way.

Exactly. And start with the most recent laws and work backwards. The laws that they are passing these days are bloated monstrosities that no one understands, including the politicians voting for them. And despite the fact that they are thousands of pages long, our politicians left much of the work to executive agencies to issue regulations. There is *far* too much discretion left to these agencies. The uncertainty that it is creating is massive.

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Author: brucedoe Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 408782 of 458907
Subject: Re: Can Washington improve GDP growth? Date: 11/17/2012 1:40 PM
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Yoda

A very relevant commentary.

The U.S. populaton in 1900 was 76.212 million (http://geography.about.com/od/obtainpopulationdata/a/uspop.h...). When I was born (1931) the U.S. population was 123 million. The population in 2000 was 281.421 million, nearly a tripling in 100 years The estimate of our population today is 314.783 million.

To make the claim that declining population growth is bad shows a very weakness of the capitalist system. It depends on a population that wants ever more (http://stopcontinentaldrift.blogspot.com/2011/08/more.html) and/or increasing exports over imports (i.e. the rest of the world wanting more). You can sell more by having a population increase (if they can find jobs) either through birth rates or immigration or you can do it by just making people want more, or both. Here advertising plays a big role (http://stopcontinentaldrift.blogspot.com/2011/12/hurry.html).
China which has had declining population growth (single child policy) but with an increasing economy because of exports is a good example.

At some point population growth results in an intractable problem. China and India are good examples where you have a subpopulaton that economically is comparatively well off but a bulk population that isn't and lives in extreme poverty.

What is the breaking point of this? It used to be said to be a population of around 200 million (we passed that around 1969), but you don't hear this any more now that our population has topped 300 million.

The above is a problem that is not discussed in Yoda's reference to [2] Research Affiliates paper: 1% . . . The New Normal Growth Rate?
http://researchaffiliates.com/ideas/pdf/fundamentals/Fundame...... who prefers increasing immigration.

It could be that through immigration we could increase GDP but also have a growing subpopulation living in poverty. We may, in fact, have turned that point (though at some point far in the future, the baby boomers too will gradually disappear).

So how can you have a satisfying "no growth" economy that can be sustained? Unfortunately, I have no idea.* A comment by a psychiatrist who treats mainly very wealthy people comes to mind, however. He said that there is one thing about very wealthy people that simplifies treatment a bit. They know that money is not the solution to their problems.

* Communism has been tried many times over the last couple of millennia. Among other failings, communism seems to result in dictatorships and not benign ones at that.

brucedoe

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Author: sykesix Big gold star, 5000 posts Top Recommended Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 408787 of 458907
Subject: Re: Can Washington improve GDP growth? Date: 11/17/2012 3:00 PM
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The great innovative genius, Genghis Khan, who created the world's largest and longest-surviving empire up to that time, is said to have insisted on cancelling old laws before making new ones so that there could not be more laws than a man can remember. I think he set the limit at 21 laws. Some of his laws enforced freedoms rather than restricting them, for instance the freedom to travel without being robbed, stopped, or taxed along the way. He was a man who understood economics very well and brought peace and prosperity to his dominions in a way that had not been previously experienced in this world.

The Mongols were a lot of things, but they sure weren't peaceful. I don't know how many laws they had, but the punishment was usually death. For example, not picking something the solider in front of you dropped was a capital offense.

I see that Wikipedia credits the Mongols for killing between 7.5%–17.1% of the world population.

http://en.wikipedia.org/wiki/List_of_wars_and_disasters_by_d...

I'm not sure they "brought prosperity" either. A favorite tactic was to force the inhabitants of a region to collect the harvest which the Mongols would keep. The Mongols would then kill all the farmers. That meant there would be no harvest next year, which brought widespread starvation. The Mongols used this tactic extensively in what is now Russia which they conquered in short order. Kiev was one of the largest cities in the world until it was sacked by the Mongols and virtually all the inhabitants were killed or enslaved. It didn't recover for centuries.

You may have heard the "Golden Age of Islam" when the Islamic world, centered in Baghdad, was a fountain of commerce, science and learning:

http://en.wikipedia.org/wiki/Islamic_Golden_Age

That ended with the Mongol sack of Baghdad, which at the time was also one of the largest cities in the world. The Mongols destroyed all the irrigation canals (which largely have not be rebuilt to this day), destroyed the libraries, and killed virtually all the male inhabitants and stacked their skulls in a giant pyramid. Baghdad was never again a world center of power, or even much more than a backwater. On the bright side they only had 21 laws.

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Author: rubberthinking Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 408845 of 458907
Subject: Re: Can Washington improve GDP growth? Date: 11/18/2012 12:11 PM
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What I understand.......is that the USA needs to come out the other side into a bull market based on GDP growth....and that maybe five years from now.....

What I understand is that most seniors are elderly women....pardon me because I am not taking on any women with this statement.......the men died off first.....that is not my fault.......but Dam it man!! are we going to simply wait for the average elderly woman five years from now to prop up what could be the greatest economy in the world?

Now what the board of libertarians are skipping over or misunderstanding......we could work towards paying working folks more by cutting their taxes.....who da thunk it????

We could create demand in the economy by different sectors of the public....instead of presupposing grandma needs to bail us out.....sounds like the drug addicts' way of how the world works......rip off grandma and all will be good for the next few hours.......

What I seem to known is that China is a lost cause....and less free than the USA and I would further say that those who see it the other way around need to move to China.......a libertarian bastion of good will.....NOT!!!

The USA has one of the first world's lowest energy cost producers.....China the EU Japan and others do not......

That last note matters more than the cost of labor......

then there is the Christmass tree a few of you put up with your fondest wishes of no regulation......I call it poisoning others......you seem to see it as a present in the stock market......

I could go back to China as a topic and call it poisoning the next two generations of Chinese folks.....but why harp on something that will be purposely twisted by an audience in part made up of dying males???

May grandma spend your monies wisely and slowly.....t'is the season.....

Dave

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Author: WilliB Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 409040 of 458907
Subject: Re: Can Washington improve GDP growth? Date: 11/20/2012 12:01 PM
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I am firmly convinced that the way Washington is run has far less to do with the current state of affairs in the economy than the way businesses are run.

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Author: markr33 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 409049 of 458907
Subject: Re: Can Washington improve GDP growth? Date: 11/20/2012 1:37 PM
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Question I've always had. If government could reliably cause growth to increase, wouldn't all governments around the world do it regularly?

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Author: qazulight Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 409050 of 458907
Subject: Re: Can Washington improve GDP growth? Date: 11/20/2012 1:53 PM
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Question I've always had. If government could reliably cause growth to increase, wouldn't all governments around the world do it regularly?

I have gained 40 pounds in the last year and a half. Does that count toward growth?

Cheers
Qazulight (Believes Southern Baptists think that bigger people equals church growth like more people, its why there are so many deserts and the fellowship meals)

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Author: markr33 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 409090 of 458907
Subject: Re: Can Washington improve GDP growth? Date: 11/20/2012 7:09 PM
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LOL. I've gained a little too and am on a diet right now.

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Author: Goofyhoofy Big funky green star, 20000 posts Top Favorite Fools Top Recommended Fools Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 409106 of 458907
Subject: Re: Can Washington improve GDP growth? Date: 11/20/2012 8:30 PM
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Question I've always had. If government could reliably cause growth to increase, wouldn't all governments around the world do it regularly?

Of course. And very often they do. Want to guess when the highest GDP growth in the US has been in the past 150 years? How about 1939-1944? Wonder when the lowest was, outside the Great Depression? 1870-1929.

Anybody think the Interstate Highway System didn't add gigantically to GDP? The R&D from NASA? Who thinks the FDIC caused fewer people to out their money in banks, which aided capital formation? What percentage of the public invested in stocks before the SEC versus after?

Would you say there was more or less government involvement in the economy in the last half of the 19th century, the first half of the 20th, or the last half of the 20th? Would you guess that rate of change of GDP accelerated more or less with increasing government involvement?

http://visualizingeconomics.com/blog/2011/03/08/long-term-re...

There is no doubt that some governments do it badly, sometimes terribly. There is just as little doubt that too little attention and involvement can be just as detrimental as too much.

Less is not always more. In fact it's often quite a bit less.

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Author: putnid Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 409109 of 458907
Subject: Re: Can Washington improve GDP growth? Date: 11/20/2012 8:46 PM
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Question I've always had. If government could reliably cause growth to increase, wouldn't all governments around the world do it regularly? - markr33

I'm surprised that anyone would think that "all governments" care enough to even try.

Over the course of some 3,000 years of recorded history, the world has had far more "governments" concerned mostly with short-term personal gains than long-term societal gains.

Think of all the tyrants, monarchs, oligarchs, colonialists, generalissimos and sociopaths who have ruled via conquest and exploitation versus the very few "governments" that sought to create strong, durable societies evidenced by an economically thriving populace.

The nations that thrived (if only for several centuries), devoted resources towards creating an infrastructure that offered economic benefits to many.

The vast majority of failed "governments" pursued self-aggrandizement to the detriment of robust economic growth.

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Author: MadCapitalist Big funky green star, 20000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 409112 of 458907
Subject: Re: Can Washington improve GDP growth? Date: 11/20/2012 9:14 PM
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Question I've always had. If government could reliably cause growth to increase, wouldn't all governments around the world do it regularly?

Of course. And very often they do. Want to guess when the highest GDP growth in the US has been in the past 150 years? How about 1939-1944? Wonder when the lowest was, outside the Great Depression? 1870-1929.


You didn't use the graph in your link to determine this, did you?

Also, 1939-1944 was a war-time command economy. It was a time of sacrifice, not prosperity. Not exactly the best example.

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Author: rubberthinking Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 409168 of 458907
Subject: Re: Can Washington improve GDP growth? Date: 11/21/2012 9:56 AM
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I'm surprised that anyone would think that "all governments" care enough to even try.


the difference between a libertarian and a liberal......okay....


Dave

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Author: markr33 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 409196 of 458907
Subject: Re: Can Washington improve GDP growth? Date: 11/21/2012 1:17 PM
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Would you say there was more or less government involvement in the economy in the last half of the 19th century, the first half of the 20th, or the last half of the 20th? Would you guess that rate of change of GDP accelerated more or less with increasing government involvement?

I don't have to "say" anything, I have the actual numbers. And, sadly, you are completely wrong this time. Government involvement in the economy has almost constantly and consistently increased for over 100 years. Meanwhile economic growth has varied widely during those 100 years. Not only that, but government continues to grow whether or not there is economic growth. See the chart linked here - http://tinyurl.com/28sm7sr

In fact, I believe that that is indeed one of our biggest problems as a nation - allowing government to grow faster than the economy for so long. I think, if it continues, it will be our downfall.

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Author: MadCapitalist Big funky green star, 20000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 409206 of 458907
Subject: Re: Can Washington improve GDP growth? Date: 11/21/2012 2:47 PM
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Would you say there was more or less government involvement in the economy in the last half of the 19th century, the first half of the 20th, or the last half of the 20th? Would you guess that rate of change of GDP accelerated more or less with increasing government involvement?

I don't have to "say" anything, I have the actual numbers. And, sadly, you are completely wrong this time. Government involvement in the economy has almost constantly and consistently increased for over 100 years. Meanwhile economic growth has varied widely during those 100 years. Not only that, but government continues to grow whether or not there is economic growth. See the chart linked here - http://tinyurl.com/28sm7sr

In fact, I believe that that is indeed one of our biggest problems as a nation - allowing government to grow faster than the economy for so long. I think, if it continues, it will be our downfall.


There were a few errors in Goofyhoofy's thesis.

First of all, when something grows geometrically (such as economic growth), the growth *appears* to grow more rapidly over time even if there is no change in growth rate. This is an illusion. Increasing $40,000 by 2% will lead to far more growth in dollar terms than increasing $4,000 by 2%. Now take a look at Goofyhoofy's graph of real GDP per capita:

http://visualizingeconomics.com/blog/2011/03/08/long-term-re...

It *appears* to support the claim that government intervention leads to greater growth. Government intervention grew over time, and the curve became steeper. Of course this is completely misleading. A constant 2% growth rate will lead to a similar graph that grows steeper over time.

Fortunately, the same website also posted a log version of the graph which corrects for this:

http://visualizingeconomics.com/blog/2011/03/10/growth-of-gd...

The log version of the graph actually seems to be supportive of the idea that government policy makes little difference. We have just been cruising along at 2% real GDP growth per capita.

However, this evidence is not compelling either. This assumes that government policy is the only variable affecting economic growth. This is one of the challenges of economics as a "science." You can't vary one variable while holding the others constant. Focusing on just one country is especially dangerous. Looking at many different countries over the same time period would be somewhat helpful.

Also, government policy isn't standardized in any way. For example, tax policy can vary in numerous ways with regard to tax rates and tax bases, so we will always be comparing apples and oranges to a degree. Or how do you measure "regulation"? It's not an easy problem to solve.

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