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

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

Borrowing and the Federal Debt

The National Priorities Project was nominated for a Nobel Peace Prize in 2014 and currently focuses on taxes, the national debt, and government transparency.

First, information from a second source with links.

“Government Budget in the United States averaged -3.02 percent of GDP from 1948 until 2015, reaching an all time high of 4.60 percent of GDP in 1948 and a record low of -12.10 percent of GDP in 2009.” – TRADING ECONOMICS quote from their page United States Government Budget 

Now back to the NPP; this article discusses the basics to understanding the federal debt.

A few overview points are as follows though the article is an excellent resource for much more information and explanation.

  • Tax cuts in 2001 and 2003 contributing impact to deficits
  • Total federal debt listed in article as of 4 June 2015: $18.153T
  • Foreign investment in U.S. Treasury Bonds
    • China $1.3T
    • Japan $1.2T
    • Brazil $262B
    • oil exporting nations $297B
    • Caribbean banking centers $293B

The entire article and links to several others for research or study can be found through the link below.

Borrowing and the Federal Debt: Federal Budget 101

By National Priorities Project (NPP)

Quantitative and Qualitative monetary easing an Overview

Introduction of “Quantitative and Qualitative Monetary Easing with a Negative Interest Rate”

Speech at the Kisaragi-kai Meeting in Tokyo
Haruhiko Kuroda
Governor of the Bank of Japan
Document provided by Fiscal Post (article link)

Continue reading Quantitative and Qualitative monetary easing an Overview

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

Taxes on Business

The OECD has proposals to close tax loopholes on international business. The concept is fine but the reasoning seems lacking.  I will look at nations with lower resource levels to otherwise attract business investment.

Continue reading Taxes on Business

OECD proposals to prevent tax avoidance on international companies

Same-sided article on proposals by OECD to draw tens of billions USD in tax revenue by preventing profit shifting.


The Economic Times

I’m personally curious if this will take the competitive advantage away from countries with lower domestic resources and thus incentivize investment with low or no tax compared to countries with higher domestic resources.

What is Zero Interest-Rate Policy (ZIRP)?

A look at Zero Interest-Rate Policy around the World with analysis of risks and benefits

http://www.investopedia.com/articles/investing/031815/what-zero-interestrate-policy-zirp.asp

By Trevir Nath

Contributor-Investopedia

“The China Bubble”

In depth analysis of economic conditions in China and recognition of economic similarities in other nations.

http://www.thebubblebubble.com/china-bubble/

The Bubble Bubble is produced by economic analyst and Forbes contributor Jesse Colombo

Link is no longer functional however @TheBubbleBubble has linked this article from twitter.