Three Converging Factors May Slash Economic Growth By 71%
By Daniel R. Amerman, CFA
Thursday, 19 July 2012
Everything from the ability to pay for Social Security, to projected federal deficits, to retirement planning and stock market valuations is based upon assumptions that the United States and other nations will emerge from crisis and return to “normal” long-term growth rates.
What happens if we don’t return to those growth rates?
When we step far back from the crisis in Europe, the US fiscal cliff, the Federal Reserve’s “twists” and “easings”, and other day to day headlines, and we instead go down deep to the very bedrock factors that help determine economic growth – then we can see that some major changes have taken place. Indeed, when we combine three of these deep and fundamental factors, there are strong historical reasons to believe that the United States growth rate could drop from a long-term historical rate of 3.5%, to an annual rate of 1.3% – and a per capita rate of 0.2% – in the coming decades.