User 305589

Recent Contraction Has Barely Affected Decades of Sustained Economic Growth

''Recent Contraction Has Barely Affected Decades of Sustained Economic Growth''

Sorry, but when it comes to the sustainability of the economic growth of the past decade, the jury is still out. Statistics clearly and undeniably show that every $ of gdp growth has been achieved with ever higher borrowings - the count now stands at $5 to borrow for every $1 in growth achieved. GDP growth of course doesn't equal overall growth of profits and incomes - especially the latter have been flat or declining over the past decade (except, of course for govt workers and most of all legions of vastly overpaid corporate execs and bankers). assuming (very optimistically) that this $1 of economic growth translates into about $0.10 of incomes/profits growth you arrive at $5 in fresh borrowings getting you 0.10$ in additional net income. At (historically very low) long term interst rates of about 3.5% you are already paying 0.175$ for the additional interst expenses, though - or a net 0.075$ loss!!. It is obvious, that this isn't sustainable at all. Not to speak of what will happen once the interest rate cycle turns up in earnest!

''The living standards of the next generation will not be chiefly determined by the severity of cyclical fluctuations, but by the long-term rate of growth in the intervening years.''

true - but it looks as if that longterm growth rate will be much lower than the atrificially propped-up short-term cyclical rates of the pat 20 years. Let's look at the same chart 2-3 years from...