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Business/Finance See other Business/Finance Articles Title: Peter Coyne, wondering if the giantocracy can still grow... Peter Coyne, wondering if the giantocracy can still grow... Stocks were mostly down today. Gold dropped $7, hitting a low of $1,307. Meanwhile, the Fed's balance sheet approaches $4 trillion -- a quarter of the size of U.S. GDP. At the same time, sustainable growth and employment are MIA as they have been for five years. We're starting to think both are long dead. But the Fed is still keeping hopeful watch. "If you look at the size of the balance sheet relative to GDP, who's got the biggest one, Japan, Europe, U.K., U.S.?" asked St. Louis Fed President James Bullard yesterday on CNBC. "We're fourth out of those guys. If something bad is going to happen… with the balance sheet, these other central banks should have passed that and already had that experience, and they haven't." We would add that nothing bad has happened to those countries, yet. On the flip side, Japan, Europe and the U.K. don't have much to show for their balance sheets. That's because coaxing interest rates isn't the key to long-term growth -- production is. And the key to increasing production is capital. Broadly speaking, capital includes savings, tools, factories, new innovations, skills learned through work or school -- anything that helps you become more productive. But having capital doesn't guarantee growth. If you spent five years working hard in engineering school, you could graduate, build a safer car for cheaper and increase people's wealth. Or you could just as easily squander your education by living on the street as a bum instead. There are no guarantees that capital will be used productively. Assuming it is, though, you'll have to keep up with its depreciation. Tools need to be repaired or replaced. People need to spend time practicing their skills. But not even this maintenance makes you grow. It only allows you to keep producing as much as you already were. If you add more and more tools or skills the economy will grow… but for so long and by so much. Like everything, there's a limit to it. Over time, the returns to capital peter out. Growth starts to slow and maybe even turn negative. That's where innovation has to step in. More on that later this week... “Over the long term, the U.S. has averaged about a 2% growth rate per capita per year.” Over the long term, the U.S. has averaged about a 2% growth rate per capita per year. If that's true, every 35 years or so, our standard of living should have doubled. We don't know if that's actually happened, but we can at least say with confidence that the U.S. is a wealthy country. There's a lot of capital here. That's because, for the most part, it was allowed to build up. People were able to save and invest without having their wealth confiscated. Entrepreneurs and immigrants knew that and saw opportunity here to work or start a business. Congress understood it too, but they saw a different opportunity. They couldn't resist all of the wealth that had built up. So they made long careers for themselves taxing and inflating capital away from wealthy groups and handing it out to their voters. In the process, the politicos strangled the goose that laid the golden eggs. Now we wonder if steady 2% growth over time is likely. The fix used to be easy. Historically, political jurisdictions were much smaller. If a king was stealing your stuff, you'd high-tail it over the border where the king didn't steal as much of his people's stuff. The threat of citizens fleeing was enough to keep politicians a little bit honest. But good luck voting with your feet in the U.S. It's a giantocracy. Yes, you can move to a state with lower debt and tax rates. And Addison tells you right here why doing as much while you still can is imperative. Still, 313 million people are still stuck between sea and shining sea, with all of the one-size-fits-all things that go along with it: one monetary policy, one federal tax code, one national debt, all the federal regulations, one all-seeing spy apparatchik. We wonder how long it can last… Poster Comment: The fix used to be easy. Historically, political jurisdictions were much smaller. If a king was stealing your stuff, you'd high-tail it over the border where the king didn't steal as much of his people's stuff. The threat of citizens fleeing was enough to keep politicians a little bit honest. But good luck voting with your feet in the U.S. It's a giantocracy. And that's the way it is here in the good old U.S.A. Time to pony up and let the pols have what they want. They will take it anyway, so why not just give it to them. Personally, I wouldn't do it, not in a million years.;) Post Comment Private Reply Ignore Thread Top • Page Up • Full Thread • Page Down • Bottom/Latest
#1. To: BTP Holdings (#0)
Capital and markets. You're not going to have markets if Israel tells you that you can't trade with Iran (which could use your machinery and technology). China's GDP, domestic wealth, manufacturing is growing because leaders are using handshake dipolmacy rather than force to obtain markets and resources (or wasting money protecting the Israeli criminal state in exchange for Jew duals arranging for the election of members of Congress).
It can last until the government, in bed w/ big banking, owns it all. When it does, people will be assigned assets; homes/apartments to live in (this is what reverse mortgages is all about), "jobs" (despite the fact that most will be no-show jobs that people will still need to show up for, food, etc. The Company will ensure that everyone shop at one of its Company Store outlets, meaning you'll have choices of which Company Store(s) to go to, but small biz will be squeezed out. So will healthy options.
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