by Mish

Let’s take a look at GDP trends and the reasons behind those trends to assess the likelihood of Trump’s claim.

US Real GDP Per Capita Quarterly at Annualized Rate

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Let’s smooth out some of the volatility by using annual GDP growth.

US Real Annual GDP

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The trend in real GDP went from over 4% in 1948 to 2% in 2016.

Reasons for Decreasing Growth

  1. Rising debt and debt service loads
  2. Increasing government interference in the free markets
  3. Demographics – Aging boomers
  4. Changing attitudes of millennials towards consumption and debt
  5. Changing attitudes of millennials towards family formation and housing
  6. Untenable pension promises and excessive public union pay
  7. Fed’s insistence on 2% inflation in a technological deflationary world
  8. Repetitive asset bubbles by the Fed that benefit the banks and already wealthy

Some blame falling population rates. The real per capita chart disprove that thesis. A massive influx of baby boomers did not reverse the trend. Yet, aging boomers and their healthcare problems will surely add to the existing problems.

Former Fed Chair Ben Bernanke blames a “savings glut”.


Larry Summers proposes “secular stagnation”, an idea also encompassing the excess savings theory.

Brad DeLong is another economist who blames excess savings.

Anyone blaming a savings glut is clueless about the true meaning of savings. Widely held notions that inflation is a benefit are also wrong.

Challenges Unanswered

My Challenge to Keynesians “Prove Rising Prices Provide an Overall Economic Benefit” has gone unanswered.

So has my challenge on the Secular Stagnation Theory: Challenge to DeLong, Summers, Bernanke, Krugman.

The economists cannot answer because the savings glut thesis and all of its derivations are total nonsense.

The BIS did a study and found routine deflation was not any problem at all.

Deflation may actually boost output. Lower prices increase real incomes and wealth. And they may also make export goods more competitive,” stated the BIS study.

For a discussion of the BIS study, please see Historical Perspective on CPI Deflations: How Damaging are They?

Grasping Reality With Both Hands

Inflation and Fed policies that attempt to force inflation in a technologically deflationary word bring about the rising inequality that the above group wants more inflation to flight!

Delong’s blog is entitled “Grasping Reality With Both Hands“. It would behoove Delong, Summers, and Ben Bernanke to do just that.

Mike “Mish” Shedlock

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