Real Economic Growth Analyzed

Excellent read from Yale economist and Federal Reserve Bank of Minneapolis consultant Timothy Kehoe. He expresses that economic growth is driven by productivity growth as opposed to prevailing view of capital accumulation as driver.

This is shown with his use, as the beginning stage and presented in excerpt below, of the Malthusian Trap. Fascinating to me and fundamentally important is how this can be applied to global economic growth beyond his analysis.

From 1999 to 2013 (set in 2013 dollars) the World GDP – per capita (PPP) rose from $6800 to $13,100.

How do we move forward with this information?

  1. wait and see: continued development and economic growth
  2. search for post Kehoe analysis: next level (Kehoe 4?) and new cycle of leader-style
  3. present consideration: spread of investment into a global economy

The median annual household income worldwide is $9,733, and the median per-capita household income is $2,920″ by Glenn Phelps and Steve Crabtree via Gallup.

Article excerpt:

Stages of economic growth

We classify the countries in our sample into four stages of economic growth. (For details on country data and classification, see the appendix.)

0. Malthusian trap
1. Taking off into growth
2. Catching up to the economic leader
3. Joining the economic leader

The Stages of Economic Growth Revisited, Part 1

by Timothy J. Kehoe

The Stages of Economic Growth Revisited, Part 2

Hard learning: The American Income Mean vs Median

Matt Phillips reporter for Quartz, and previously the Wall Street Journal, offers assistance as people try to figure out the difference between mean and median income. From his perspective it appears Americans may be learning by proverbial “osmosis” rather than studiously as incomes diverge. With analysis from the Federal Reserve’s triennial survey of consumer finances Mr. Phillips shows how exactly the economy has improved.

Excerpt from article:

“despite the fact that mean income rose 4% to $87,200 per family, median income actually fell by 5% to $46,700 between 2010 and 2013.”

To be clear this means that the number of people making below median income has increased so significantly that the median actually fell while the majority of money itself rose for those fewer above median income.

Painfully, American families are learning the difference between median and mean

by Matt Phillips

The U.S. Debt, unlike the South – it will rise again

[Note on Image: picture the reverse as well but combined – fiscal cliff?]

A view forward to 2020 there will be an increase in entitlement spending as noted in the article per one of the President’s within the Federal Reserve district banks. With Baby Boomers moving to peak in claiming Social Security and Medicare benefits coupled with rising interest rates, my previous prediction of a rough year approximately 2019 doesn’t seem so radical.

IMO 2019/2020 also aligns with a roughly typical 10-year cycle of consumer tentativeness, increased investing, and then fear brought about by roughly steady years of growth (albeit this time slow, low, and difficult to accept as rebounded). I like to think of this as a revolving Jungian Cycle limited to Summer and Autumn.

I know there is plenty of debate on these issues but the economy has recovered to the point we’ve increased interest rates and with the entitlement wall approaching fast, beware the scare.

Affordable Care is a beast and not quite perfect but in this humble opinion it is the one thing going to keep the Baby Boomers from a scary end and I for one am willing to swallow the dark, expensive pill as a Millennial, will you Gen X?

The U.S. Debt: Why It Will Continue To Rise

by Forbes Contributor Mike Patton

Monetary Policy and Low Interest Rates

I believe that from the article it is clear that two things are happening with regard to low interest rates. First, the general population is being placed into slow-motion, allowing people to organize and adjust to their current situation. This time allotment can provide a good opportunity for people to assess their financial status and make plans before moving forward. A slow down from the need to make quick decisions regarding finances could lead to long term growth and stability. Second, investors aren’t seeing the long term trends which were previously forecast and so there is a great frustration with this slow-motion as returns aren’t actualizing. I worry that this group is going to push for things to move along at an earlier time than people will be prepared for in the hope of setting new long term forecasts that are more palatable to their previous forecasts. If we move too quickly, the long term growth and stability that everyone from all groups is looking for may not be recognized.

Article: Do ultra-low interest rates really damage growth?

by D.D. | LONDON – The Economist

Federal Reserve and Economic Recovery

Ben Bernanke explains how Federal Reserve actions have assisted in positives for the U.S. especially in comparison to the world market with regard to unemployment and economic output and discusses Federal Reserve controls regarding Monetary Policy and Inflation.

How the Fed saved the economy

By: Ben S. Bernanke – Distinguished Fellow in Residence (Economic Studies): Brookings Institution

Highways, Banks & Congress

Editorial on cutting the Fed dividend rate from 6% to 1.5%

http://wp.me/p6C8Ep-2c

By Chanel Rose – independent on WordPress


For more information on the Fed and Dividend Rates read this article by author for NewRepublic.com.  Article includes a brief history of and examples related to Fed and Dividend Rates.