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re: What is your outlook on the economy?

Posted on 9/12/14 at 4:48 pm to
Posted by Doc Fenton
New York, NY
Member since Feb 2007
52698 posts
Posted on 9/12/14 at 4:48 pm to
But after that hijack, I think it's important for people to distinguish among different levels of economic outlooks.

There are short-term considerations that are mostly based on consumer demand analysis and credit risk. It's important for planning corporate investments, but it doesn't tell you much of anything about long-term productivity growth.

Longer-term asset planners seeking to optimize portfolio rebalancings will get into more sophisticated "secular cycle" theories, and these are more of where my interests are. There are also actuarial types of analyses that cover government debt and pension plans, but those can be kind of dry, and by their nature they cannot factor in big-event qualitative changes in the nature of how society decides to structure its political economy.

Finally, the part I care most about is the long-term productivity and demographics angles, and this is where you necessarily get involved with politics and sociological theories about inequality, the bifurcation of society into separate classes due to education and welfare policies, etc. It's what I care most about, and it's also the part you can quantify the least.

Everyone tries to measure worker productivity growth, but really, it seems to me that such a metric is mostly just a statistic calculated by seeing what will balance out other macroeconomic equations. It's not easy to judge how truly productive workers are, and it's not easy to measure true technological progress with GDP statistics.

With all that being said, here is where I would put my own outlook for the economy on various different levels:

short-term stability -- seems good, or at least better than before; the recovery has been so bad that it seems that there is plenty of room to go up

asset valuation -- seems like there are a lot of danger signs here, and that there will likely be poorer returns on both equities and bonds than what has historically been the case, for a long time going forward

long-term growth prospects -- doesn't look very good; it looks like we might be trapped into a new normal of lower per capita GDP growth, well below potential long-term growth; globally, however, there is cause for a lot of hope as the developing world catches up to us, there should continue to be a lot of returns to scale in being able to produce better goods cheapers
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