Salient to Investors:

Professor Robert Gordon at Northwestern University said:

  • The U.S.’s best 250 years are behind it as economic growth may gradually sputter out, contradicting the nearly universal view promoted by Robert Solow and others that economic growth is a continuous process that will persist forever.
  • Future growth in GDP per capita could slow to 0.2 percent by 2100 from 2 percent over the past 150 years, and as high as 2.5 percent in the middle of the 20th century.
  • Before, 1750 there was virtually no expansion. The past 250 years saw three industrial revolutions which explain the growth spurt. The first lasted until 1830 and was driven by steam engines and cotton spinning. The second, from 1870 through 1900 was driven by the harnessing of electricity, running water and the internal combustion engine. The third began around 1970 and was driven by computer and Internet revolutions.
  • Innovation will still support living standards, but demographics, rising inequality, globalization, more expensive education and poorer performance in secondary schooling, environmental regulations and taxes are obstacles to increasing prosperity.

Gustavo Reis at Bank of America Merrill Lynch said the global money gap, or money supply as a share of GDP, has turned negative, meaning less money is available to fuel economic activity, while credit as a percentage of GDP is dipping below zero. The result is the world’s largest central banks look poised to deliver significant policy easing in the months ahead as the global economy remains subdued into year-end.

The Taylor Rule suggests global money policy will remain accommodative even though it’s not as loose as earlier in the year.

Joerg Kraemer, Ralph Solveen and Bernd Meyer at Commerzbank  say easy monetary policy, accelerating inflation and a soft currency may become the hallmarks of the euro region, stabilizing its economy and obscuring structural weaknesses of peripheral countries: supporting equities and corporate debt into 2014 as investors unwind bets on the euro breaking up and as investment grows as uncertainty diminishes. Longer-term, economies including Germany, would overheat – it took a decade for Spain’s property bubble to burst

Christian Schulz at Berenberg Bank said exports are the ultimate yardstick of competitiveness, and suggest the euro region is succeeding in global markets – its estimated trade surplus of $50.1 billion over 12 months is the best since 2005.

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