Vanguard Sees Lots To Like In 2% GDP Growth: Financial Advisors' Daily Digest

by: SA Gil Weinreich

Summary

​Vanguard views today’s lower rate of economic growth as more sustainable and healthier than the higher pre-financial crisis level.

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An investment expert and retirement expert both come out in favor of partial annuitization as a means of securing retirement.

Complaints about sub-par economic growth have been unceasing since the global financial crisis, often pegged as criticism of governmental policy mistakes. But Vanguard sees reason to be cheerful about the caesura in the pre-crisis 3% growth to today's 2% trend.

"The [pre-crisis] explosive growth in debt-financed consumer spending was a risky, if temporarily effective, economic steroid…Without the debt-financed spike in consumer spending from 1980 to 2007, GDP growth would have been 0.76 percentage point lower. If we adjust that figure for the slower population growth that we…can expect in the decades ahead, GDP growth would have been about 2% per year. The new normal is mostly the old normal, minus the surge in performance-enhancing debt."

That upbeat point of view contrasts with a predominantly bleak perspective in today's news and views, starting with the IMF's gloomy global forecast: