Best of the Week
Most Popular
1. US Housing Market Real Estate Crash The Next Shoe To Drop – Part II - Chris_Vermeulen
2.The Coronavirus Greatest Economic Depression in History? - Nadeem_Walayat
3.US Real Estate Housing Market Crash Is The Next Shoe To Drop - Chris_Vermeulen
4.Coronavirus Stock Market Trend Implications and AI Mega-trend Stocks Buying Levels - Nadeem_Walayat
5. Are Coronavirus Death Statistics Exaggerated? Worse than Seasonal Flu or Not?- Nadeem_Walayat
6.Coronavirus Stock Market Trend Implications, Global Recession and AI Stocks Buying Levels - Nadeem_Walayat
7.US Fourth Turning Accelerating Towards Debt Climax - James_Quinn
8.Dow Stock Market Trend Analysis and Forecast - Nadeem_Walayat
9.Britain's FAKE Coronavirus Death Statistics Exposed - Nadeem_Walayat
10.Commodity Markets Crash Catastrophe Charts - Rambus_Chartology
Last 7 days
AMD Ryzen 4900x / 5900x and 4950x / 5950x Zen3 4th Gen IPC and Clock Speed and Core Specs - 14th Aug 20
Stock Market Gap Fills Suggests Market Momentum May Stall - 14th Aug 20
Silver May Be Overextended – But It’s STILL Cheap - 14th Aug 20
A Short Guide To Making Your First Stock Market Investment - 14th Aug 20
Is Tech Reality Affects our Dating Possibilities? - 14th Aug 20
Will You Make Money in the New Silver Bull Market ? - 13th Aug 20
Hyper-Deflation Capital Destruction And Gold & Silver - 13th Aug 20
Stock Market Correction Approaching - 13th Aug 20
Silver Took the Stairs to $21 in 2008, Took Escalator to $29 2010. Is Silver on Elevator to 120th floor today? - 13th Aug 20
President Trump Signs Additional COVID Relief – What To Expect from the Markets - 13th Aug 20
Has Gold's Upward Drive Come to an End? - 13th Aug 20
YouTuber Ads Revenue & How to Start a Career on YouTube - 13th Aug 20
Silver Notches Best Month Since 1979 - 12th Aug 20
Silver Shorts Get Squeezed Hard… What’s Next? - 12th Aug 20
A Tale of Two Precious Metal Bulls - 12th Aug 20
Stock Market Melt-Up Continues While Precious Metals Warn of Risks - 12th Aug 20
How Does the Gold Fit the Corona World? - 12th Aug 20
3 (free) ways to ride next big wave in EURUSD, USDJPY, gold, silver and more - 12th Aug 20
A Simple Way to Preserve Your Wealth Amid Uncertainty - 11th Aug 20
Precious Metals Complex Impulse Move : Where Is next Resistance? - 11th Aug 20
Gold Miners Junior Stcks Buying Spree - 11th Aug 20
Has the Fed Let the Inflation Genie Out of the Bottle? - 10th Aug 20
The Strange Food Trend That’s Making Investors Rich - 10th Aug 20
Supply & Demand For Money – The End of Inflation? - 10th Aug 20
Revisiting Our Silver and Gold Predictions – Get Ready For Higher Prices - 10th Aug 20
Storm Clouds Are Gathering for a Major Stock and Commodity Markets Downturn - 10th Aug 20
A 90-Year-Old Stock Market Investment Insight That's Relevant in 2020 - 10th Aug 20
Debt and Dollar Collapse Leading to Potential Stock Market Melt-Up, - 10th Aug 20
Coronavirus: UK Parents Demand ALL Schools OPEN September, 7 Million Children Abandoned by Teachers - 9th Aug 20
Computer GPU Fans Not Spinning Quick FIX - Sticky Fans Solution - 9th Aug 20
Find the Best Speech Converter for You - 9th Aug 20
Silver Bull Market Update - 7th Aug 20
This Inflation-Adjusted Silver Chart Tells An Interesting Story - 7th Aug 20
The Great American Housing Boom Has Begun - 7th Aug 20
NATURAL GAS BEGINS UPSIDE BREAKOUT MOVE - 7th Aug 20
Know About Lotteries With The Best Odds Of Winning - 7th Aug 20
Could Gold Price Reach $7,000 by 2030? - 6th Aug 20
Bananas for All! Keep Dancing… FOMC - 6th Aug 20
How to Do Bets During This Time - 6th Aug 20
How to develop your stock trading strategy - 6th Aug 20
Stock Investors What to do if Trump Bans TikTok - 5th Aug 20
Gold Trifecta of Key Signals for Gold Mining Stocks - 5th Aug 20
ARE YOU LOVING YOUR SERVITUDE? - 5th Aug 20
Stock Market Uptrend Continues? - 4th Aug 20
The Dimensions of Covid-19: The Hong Kong Flu Redux - 4th Aug 20
High Yield Junk Bonds Are Hot Again -- Despite Warning Signs - 4th Aug 20
Gold Stocks Autumn Rally - 4th Aug 20
“Government Sachs” Is Worried About the Federal Reserve Note - 4th Aug 20
Gold Miners Still Pushing That Cart of Rocks Up Hill - 4th Aug 20
UK Government to Cancel Christmas - Crazy Covid Eid 2020! - 4th Aug 20
Covid-19 Exposes NHS Institutional Racism Against Black and Asian Staff and Patients - 4th Aug 20
How Sony Is Fueling the Computer Vision Boom - 3rd Aug 20
Computer Gaming System Rig Top Tips For 6 Years Future Proofing Build Spec - 3rd Aug 20
Cornwwall Bude Caravan Park Holidays 2020 - Look Inside Holiday Resort Caravan - 3rd Aug 20
UK Caravan Park Holidays 2020 Review - Hoseasons Cayton Bay North East England - 3rd Aug 20
Best Travel Bags for 2020 Summer Holidays , Back Sling packs, water proof, money belt and tactical - 3rd Aug 20
Precious Metals Warn Of Increased Volatility Ahead - 2nd Aug 20
The Key USDX Sign for Gold and Silver - 2nd Aug 20
Corona Crisis Will Have Lasting Impact on Gold Market - 2nd Aug 20
Gold & Silver: Two Pictures - 1st Aug 20
The Bullish Case for Stocks Isn't Over Yet - 1st Aug 20
Is Gold Price Action Warning Of Imminent Monetary Collapse - Part 2? - 1st Aug 20
Will America Accept the World's Worst Pandemic Response Government - 1st Aug 20
Stock Market Technical Patterns, Future Expectations and More – Part II - 1st Aug 20
Trump White House Accelerating Toward a US Dollar Crisis - 31st Jul 20
Why US Commercial Real Estate is Set to Get Slammed - 31st Jul 20
Gold Price Blows Through Upside Resistance - The Chase Is On - 31st Jul 20
Is Crude Oil Price Setting Up for a Waterfall Decline? - 31st Jul 20

Market Oracle FREE Newsletter

How to Get Rich Investing in Stocks by Riding the Electron Wave

Is the U.S. Economic Growth Spurt Over?

Economics / US Economy May 23, 2011 - 06:26 AM GMT

By: Bill_Bonner

Economics

Best Financial Markets Analysis ArticleAs you know, we’ve been wondering about the exhaustion of the Industrial Revolution innovation…and the bankruptcy of the Social Welfare state as a result.

We take for granted that a healthy economy “grows.” Our governments depend on it to pay the bills. Our investments depend on it too; we buy investments that we hope will become more valuable as sales and profits grow along with the economy. But what if all of our assumptions about what is “normal” are wrong? What if the growth spurt we have known for the last 300 years was the exception, not the rule? And what if it were now coming to an end?


We traveled to Switzerland yesterday. What a great town Zurich is! Clean…prosperous…charming. And last night, it seemed like there were more people enjoying the warm May evening than there were townspeople. The sidewalk cafes, restaurants and bars were overflowing. Everyone was outside…strolling…chatting…drinking. The Swiss must have it made.

“Well, yes, it’s a great place to live. But not if you live on a salary,” a banker explained. “There are so many Germans moving here – because it’s a beautiful city…and because people leave you alone here – prices have gone up. An ordinary citizen can hardly afford to live in Zurich anymore. And when I walk down the Bahnhofstrasse I rarely hear our local language spoken. I hear High German, or Russian, or Turkish, or English.”

We can confirm that prices are high. Not by DSK standards, but high for us. Our hotel near the train station was not particularly fancy. But our modest room still cost about $700 a night.

Our friend Rolf Dobelli of getAbstract interviewed us. He challenged our “end of progress” theory.

“It’s hardly a theory,” we covered our tracks. “It’s just an idea. We don’t know if we believe it. Or like it. We’re just trying it on to see how it fits.”

“Yes, but people take ideas seriously. They might have come to the same conclusion in 1979,” he said. “They might have thought that the boom years were over then. But as it turned out, there were still huge growth dividends to be paid – principally from electronic communications and the efficiency gains they bring.”

“Maybe,” we replied. “But most of the above-trend, real growth since 1979 has been in the energy economies, that are still increasing their energy use per person. The mature economies have realized incremental improvements since then, but much of that was phony – driven by increases in debt and government spending. And it’s not clear that advances in communications bring real wealth improvements. Think of the television. It’s been around for more than half a century. It has probably actually depressed wealth since then. Now, with all those emails to answer…and Facebook and Twitter to keep up with…it could be that they are more of a nuisance than a wealth-producer.

“It’s like anything else. You get the big gains in the beginning. You invent a bow and arrow, for example. You hunt more effectively. Then, you can improve it. But there are only so many improvements you can make. After the bow and arrow, humans waited a long time – with little or no progress – until the firearm was invented. And note that guns, like every other major forward move in human history, were effectively a way of using more energy. You sent a projectile further, faster by drawing on condensed energy sources. Broadly, energy is wealth. The more you use, the richer you are.”

“But what about conservation measures…efficiency gains? Most European nations have stabilized or even reduced their use of energy in recent years.”

“That’s my point. You get big productivity and wealth gains from the first increments of oil-based energy. Then, you eventually reach a point of diminishing returns, where gains are few. You become more efficient. You become better at using it. But your ‘growth’ levels off too.

“We’re seeing a reflection of this in population figures. Fertility rates are high in the emerging economies – where energy use is increasing rapidly. They are low in countries where energy use is topping out. In Germany and Japan – probably among the world’s most efficient energy users – there has been zero population growth for the last 10 years. And now, the population in Japan is actually falling. The Japanese economy is collapsing too. It’s gone nowhere for 20 years, and now – in the first quarter of this year – it’s shrinking at a 3.7% rate.

“As countries use more energy their birth rates decline. I’m not sure there is a cause and effect link, but that’s what happens. It is as if people knew, subconsciously, that they are reaching the limits of their new, oil-fired habitat. The latest population estimates show world population still rising…but at a slower and slower rate…until growth comes to an end in about 2050 with about 9 million people on the planet. Most likely, that is about when gains from additional energy inputs level off too.”

Meanwhile, the news yesterday brought nothing special. US stocks rose a bit. Oil remained below $100 – still three times what it was 5 years ago. Gold fell to $1,492.

The Fed pumps in more and more money. Stocks float. But key parts of the US economy are made of lead. Housing and unemployment, mainly. The New York Times tells us today that debt-burdened college graduates are having a much harder time finding suitable work. And when they do find a job, the starting salary will be an average of 10% lower than it was 5 years ago – not including inflation.

Even when new jobs are created, they’re rarely the “middle class” jobs that can support the housing market. So more than 1 out of every 4 homeowners is underwater…with more sinking every day.

Curiously, many of these drowning homeowners are actually helping to support the consumer economy. More than 4 million of them aren’t making regular mortgage payments. The typical foreclosed mortgage hasn’t been serviced in more than 17 months. That leaves millions of people in houses they aren’t paying for…giving them more money to spend.

Bill Bonner
The Daily Reckoning

Bill Bonner [send him mail] is the author, with Addison Wiggin, of Financial Reckoning Day: Surviving the Soft Depression of The 21st Century and Empire of Debt: The Rise Of An Epic Financial Crisis and the co-author with Lila Rajiva of Mobs, Messiahs and Markets (Wiley, 2007).

http://www.lewrockwell.com

    © 2011 Copyright The Daily Reckoning, Bill Bonner - All Rights Reserved
    Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules