On the Persistence of Economic Growth
There are many doomsayers on the economy and markets. They all say roughly the same thing: we have been profligate as a nation and as a world, and there is a big price to pay. This price will be paid in the form of a very long period of economic stagnation and declining markets. The doomsayers give many seemingly sound reasons for their outlook, that to some may seem irrefutable evidence of a coming economic armageddon.
Unfortunately, history does not support their thesis. If anything, what economic history proves is that there is a wired-in persistence of growth in the economy. When we look at our financial surroundings on a day to day basis, we get confused by the noise. Daily, monthly, even quarterly data might seem to indicate some watershed change in the economic future. But the facts show us that year after year, decade after decade, the economy continues to grow very evenly and consistently. The markets will mirror this growth in the long term, and once all the daily noise is removed.
Here is a chart I prepared showing this persistence. It dates from the earliest Gross National Product data available on the government economic data website. It shows that even the 1930s disaster looks relatively benign in an 80 year perspective.
The conclusion: invest for the future, not the next day. And you will be richly rewarded for your patience.
Related posts:
Hi Brian. I have two very good articles for you, by Canadian professor R. Tremblay
They are called “The Dance of the Trillions to Shore up Banks, Bankers, and Gamblers”, and “The Great Baby-Boomers Economic Stagnation of 2007-2017″. Very academic and intelligent insight indeed.
http://www.globalresearch.ca/index.php?context=va&aid=12918
http://www.globalresearch.ca/index.php?context=va&aid=14268
As for your recent post, look at the chart you provided, it took from 1929 to 1940 to get from 100 to 100. 10 years, that might not seem a lot when looking from 80 years perspective, but that is a lot when/ if considering we are at the start of the decline.
As always, it’s interesting reading your posts.
Have a nice day.
Thanks Andrei. I will read up on those articles.
My take on the market and its persistence and cycles, is that we are near the end of a 10 year correction, not near the beginning. This period of unsettled markets began with the blowoff top of the Internet bubble in 1999-2000. That began a period of 10 years of instability. There was a stock market advance from the 2002 bottom that eventually reached 1550 on the SP500. But it was based on an artifical level of liquidity put in place by Greenspan and not taken away by Bernanke when he had the chance (2004-06).
Even now, the stock market is at levels last seen in the late 1990s and again in the 2003-04 period. We have been sideways in the stock market for over 10 years. All this was predicted by Warren Buffett in 2001 by the way. So, I think the GNP growth will march on at its historic pace, and the stock markets will move in concert, though with much more volatility.
Agreed. Investing is ALWAYS a good idea. Recessions come and go, but the future is bright for those who invest in it. Great post.
Robert´s last blog ..South African Man Marries Four Women Simultaneously–Talk About a Need for Life Insurance!
Thank you very much for that great article