Salient to Investors:

Gary Shilling writes:

  • The pessimistic economic theories are wrong.
  • Weak growth will NOT last forever despite the Reinhart-Rogoff findings that the economy contracts at a 0.1 percent annual rate when government debt exceeds 90 percent of GDP.
  • In the late 1970s and early 1980s many economists presumed high inflation would last forever, yet we got disinflation by the mid 1980s. The post-war baby boom raised fears of a population explosion, yet was followed by the post-war baby bust.
  • Many experts believed that the aggressive monetary stimulus after the 2000 stock market collapse that appeared to have stabilized the economy meant that central bankers had overcome the business cycle, yet they caused the  2007-2009 recession.
  • Glenn Hubbard at Columbia Business School and Tim Kane at the Hudson Institute believe great powers fall into the trap of denying the internal nature of stagnation, centralizing power and rob the future to overspend on the present.
  • Larry Summers worries about persistently slow growth due to slow labor-force expansion and muted productivity growth.
  • Niall Ferguson at the Hoover Institution believes encroaching government is strangling private initiative, especially in the US, and threatens representative government, the free market, the rule of law and civil society.
  • Robert Gordon at Northwestern University believes that all the big growth-driving technologies have been fully exploited and that the era of 2 percent annual output growth per capita from 1891 to 2007 is over and that 1 percent annual growth and personal incomes growing at 0.5 percent annually is ahead.
  • Jonathan Laing wrote in Barron’s that the growth in the US labor force in coming decades will slow due to low birth rates and less immigration – both global trends – as will productivity advances. Laing believes any productivity increase will come from machines replacing middle-income employees.
  • Increased government regulation does stifle innovation and reduce efficiency and, therefore, growth. By 2018, the percent of Americans received meaningful financial support from the government will rise to 67% versus 28.7% in 1950, 52.4 percent in 1970 and 58.2 percent in 2007. Yet the fact that the 50 percent level was breached 43 years ago attests to the American character of deep-seated self-sufficiency.


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