Heh, that's a funny number. Why is it funny? Because it's .05% off from the 2.25% average growth rate we've experienced for the past 20 years. Regular readers are probably already familiar with this statistic in that I've constantly highlighted one of my favorite charts - rolling 20 year average RGDP growth. In other words, what is the long term average economic growth rate?
Again, the reason why this chart is so interesting AND important is that it shows the decline and decay in America's ability to produce, grow and progress. We were once growing at 4% per year on average, now we're down to 2.25%. It also brings a cold, harsh and brutal reality to previous generations who voted themselves in a whole bunch of entitlement goodies in making it quite black and white that the economy is simply not going to be able to produce the wealth necessary to make good on those promises (so sorry BB's. You're going to have very cheap nursing homes, despite what Jim Morrison and LSD told you).
However, while I was putting together a seminar titled "How Gen Y is Completely, Hopelessly and Totally Screwed," this chart got me thinking:
"What would our GDP or "income per capita" be if we had continued to grow at 4%?"
My brain, knowing the power of compounding roughly estimated it to be around $100,000 (click it, see if I was lying) per person per year vs. our $45,000 today. But I hadn't calculated it out...until now.
Had we continued our traditional, old school, EVIL and OPPRESSIVE 1950's economic growth, our GDP would NOT be the paltry $14 trillion it is today (in 2005 numbers), it would be closer to $26 trillion.
We take the roughly 310 million Americans in the country today and that translates into a real GDP per capita of about $84,500. However, that figure is in 2005 dollars. I was surprised to find out based on the CPI how much inflation has occurred since then (despite what the government tells us) and apparently the US dollar has inflated by about 18%. You adjust for that and what do you get?
$99,832.
Did I say $100,000 as just a guess?
Yes ladies, yes I did. But then again, what do you expect when you have patented and god-given "Super Awesome Economic Genius (TM)?"
Now I'm not going to go into a long tirade here because, well, I've learned to enjoy the decline.
All I'm going to point out is one simple thing.
All these economic problems we have with debt and social security and economic growth and student loans, etc. etc. - All these problems would be washed away if we had maintained our previous economy growth rate.
But we didn't, did we?
Why?
Well because starting with the baby boomers and passing this philosophy on to successive generations we started ridiculing, mocking, criminalizing and villainizing that things that gave us such a luxurious standard of living - Capitalism, freedom, liberty and all that is America.
You wanted social programs and "The Great Society"
You got it.
You wanted to help out the losers of society?
You got it.
You wanted to reward people for their idiotic mistakes?
You got it.
You wanted to lower standards so to save people's feelings?
You got it.
And let's not forget blaming the evil corporations for all of our problems as well as constantly telling ourselves and our children "money isn't everything." And hey, let's make up some commie BS about combustion engines contributing to global warming!
Well, you got it.
And what's the result of all this hokey pokey, kumbya, socialist commie bullshit? A country that is no longer growing or prospering, but is stagnant and on the derivative value of 0, entering into decay (if you don't know the calculus joke, then don't feel bad, you're just the average American liberal arts graduate).
Worse than that is you have a country that is so ignorant, uneducated and (frankly) brainwashed, that the above chart and its simplicity of GROWING ourselves out of our problems is completely lost on you idiots. Instead, you're so obsessed with stealing other people's wealth for your own, the thought of producing your own freaking wealth, even to the point you'd have more wealth than others, has never entered your mind. The only sad, pathetic, LOSER of a solution you can come up with is to take other people's money which makes you the epitome of a parasite.
So while you sit there and protest, and bitch and whine and complain, and vote in politicians who promise to take from other people simply to give it to you, you'll forgive me as I laugh my ass off at all of you. Because in the end, there is only ONE SOLUTION to this problem. And that is pursuing PRO GROWTH economic policies and NOT the redistributive bullshit that got us into the problems we have in the first place.
Enjoy the decline, because I know I will.
(Would somebody tell Zero Hedge? I think the chart showing potential RGDP per capita is Zero Hedge worthy).
I've been preaching that same sermon for years now only, without the benefit of being an economic chart wizard, as art thou.
ReplyDeleteGreat piece I will pass it on.
If the priority had just been helping out the less fortunate, it would have cost a lot less just to send every American householder a check every month. (A few of the smarter liberals even proposed this from time to time.) The real reason the size of government mushroomed in the mid Sixties was that that was when the priority became making an ungodly number of make-work jobs for a generation of over-educated "feminist" dingbats who thought they were too good for marriage but had no skills an industrial economy actually needed, so nobody would hire them except to avoid anti-discrimination lawsuits.
ReplyDeleteOf course, men were expected to pay the taxes to pay it all. No prizes for guessing what happened to men's incentive to produce and innovate.
Yeah, we could have used that money. Too bad American women who couldn't be arsed to cook dinner and put out (which is all most of them were good for) grabbed men's paychecks before they got them and spent it on shoes, chocolates and fancy furniture.
You think they deserve even a cheap nursing home in their old age, Captain? If I thought we could euthanasize the old hags and be done with it, I'd be looking forward to the decline a lot more. As it is, it's going to get harder each year to find the money from (male) taxpayers to pay for their care in their old age, and by then they'll be past even sex work to keep body and soul together. Their cat "children" won't be much help either.
He who laughs last (and it will be a he) laughs loudest.
I think the new liberal/enviro theory is that low growth is "sustainable" whereas high growth isn't.
ReplyDeleteYou're looking at the wrong chart.
ReplyDeleteLook at per capita GDP in ounces of gold.
The "official" GDP is flawed because the deflator is the CPI, which understates true inflation.
'Atlas' is tired of being the scapegoat for every feminist's lie and false accusation and the failure of every socialist's hare-brained scheme, as well as being robbed every payday by avaricious, two-faced politicians -- so 'Atlas is shrugging'.
ReplyDeleteA successful society can't denigrate and persecute it's innovators and producers while simultaneously praising and worshipping it's looters and parasites, and then expect to last very long.
Enjoy the decline!
I believe you are on to something here, as government isn't as good at allocating capital as individuals are. A couple of concerns I have are:
ReplyDelete1. Why use a 20 year rolling average?
2. Just because two variables are correlated (or negatively correlated in this case) doesn't mean that one is causing the other. Maybe our GDP was so good in the 50's because previously during WWII we blew up much of Europe's productive capacity giving us a competitive advantage for a decade or so. This competitve advantage would explain strong GDP in the 50's and maybe weaker growth in later years as the advantage was eroded.
3. What about comparing GDP in the same fashion against consumption, investment, imports and exports? How do these variables compare as time goes on.
The amount of regulations is likely growing at 4% a year, though. The effect pushes the curve downwards as productive assets are delayed or sidelines. Consider:
ReplyDeleteWe built the Empire State Building in 15 months (1930s).
We built the World Trade Center (Tower 1) in 52 months (1970).
Today, the replacement tower isn't complete a decade after the attack - 127 months later.
My take is that the cost of the buildings full of bureaucrats isn't measured in their fully burdened cost, but in the lost growth due to delayed (or like the Keystone Pipeline) lost productive investment.
Hello Captain,
ReplyDeleteI much enjoy your analysis. Here is something of a curve ball.
Find the flaw in the cost/benefit analysis of Taxation and I shall award the author of the refutation $50,000US.
Regards,
Gary Marshall
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The government or taxing authority does not generate any of its own revenue.
Governments do not pay taxes. They never have and they never will. When the bill for public expenditures arrives, the various levels of government simply pass it along to the taxpayer.
The whole of public expenditures is deficit financed. If the government spends $200 billion on various public investments, then the deficit is actually $200 billion. It does not really matter if the tax financed portion of this deficit were $180 billion and the borrowing financed portion were $20 billion. Its all deficit.
The only thing to really decide is would the nation have been better off if those who earned the funds taken by government had kept them and put them to more productive use. If the government had a more productive use, then the nation would have benefited. If otherwise, then the nation loses. Generally, the nation loses as you yourself note.
So if you wish to assess the government’s finances, you must turn to the taxpayers’ finances to do so. Can the government pay a note? Only the taxpayers can furnish an answer.
The only reason a nation will tax is to avoid interest charges. In government borrowing, the nation, its taxpayers, must pay interest on the principal borrowed whilst the government delays taxing the principal and repaying the loan.
The following is a short proof which nullifies those supposed interest savings garnered from the use of Taxation.
The costs of borrowing for a nation to fund public expenditures, if it borrows solely from its resident citizens and in the nation’s currency, is nil.
Why? Because if, in adding a financial debt to a community, one adds an equivalent financial asset, the aggregate finances of the community will not in any way be altered. This is simple reasoning confirmed by simple arithmetic.
The community is the source of the government’s funds. The government
taxes the community to pay for public services provided by the government.
Cost of public services is $10 million.
Scenario1: The government taxes $10 million.
Community finances: minus $10 million from community bank accounts for government expenditures. No community government debt, no community
government IOU.
Scenario 2: The government borrows $10 million from solely community
lenders at a certain interest rate.
Community finances: minus $10 million from community bank accounts for government expenditures. Community government debt: $10 million; Community government bond: $10 million.
At x years in the future: the asset held by the community (lenders) will be $10 million + y interest. The deferred liability claimed against the community (taxpayers) will be $10 million + y interest.
The value of all community government debts when combined with all community government IOUs or bonds is zero for the community.
It is the same $0 combined worth whether the community pays its taxes immediately or never pays them at all.
So if a community borrows from its own citizens to fund worthy public expenditures rather than taxes those citizens, it will not alter the aggregate finances of the community or the wealth of the community any more than taxation would have. Adding a financial debt and an equivalent financial asset to a community will cause the elimination of both when summed.
Whatever financial benefit taxation possesses is nullified by the fact that borrowing instead of taxation places no greater financial burden on the community. However, the costs of Taxation are immense. By ridding the nation of Taxation and instituting borrowing to fund public expenditures, the nation will shed all those costs of Taxation in deterrence and government excess for the negligible fee of borrowing in the financial markets and the administration of public debt.
###
oh cappy chappy,
ReplyDeleteyou don't get out much do ya....
american's are experiencing tremedous growth....
growth around their waist lines....
Not only would the average wage be in-between $90,000 and $100,000 a year, I'd also have a jetback and a laser pistol.
ReplyDeleteDamn. Just damn.
Fantastic post. LBJ's power grab set this all in motion. His social programs bought votes, the immigration act imported new workers who depressed wages while not adding to American innovation and the AA regulations crushed the idea of choosing the best of the best all of the time.
ReplyDeleteI call our society 'negative society' in that all things worthy of praise are mocked while we elevate things formerly viewed as bad (single moms).
"A successful society can't denigrate and persecute it's innovators and producers while simultaneously praising and worshipping it's looters and parasites, and then expect to last very long," says a reader above.
ReplyDeleteI suggest that this is exactly what the Marxists and Leninists in our governments and universities want to happen.
In their teachings and instigations they have issued a moral license the the moochers and the gullible that says, Go For It! You Are Entitled. And away they go, liberated from any sense of guilt or obligation, freeloading their way through life without so much as a 'thank you'; After all they're 'entitled.'
When the freebies run out, when paper money is being used as burn-barrel kindling, the Entitled will go looting through 'direct action' their state agents now being powerless to provide anymore. "Sorry, Bud, there's no more money. Food stamps , not so much I guess. What's that?? .... Well, sorry. Sucks to be you." [click]
The Entitled will be roaming through condo complexes, the residential suburbs and shopping centers foraging for food, gas and booze. Are you ready for a dozen of them-- sunglasses, ball caps askew --coming up your walk at night to loot your larder?
Just askin' ....
I know that it is fashionable to discuss the BB but you are missing an important fact
ReplyDeleteThe BB was from 1947 to 1964 or 1968 at the latest based upon various methodology used
If you were born in 47 when LBJ was elected president you were the grand age of 16 and you could only have voted in a Democratic strong hold.
Unfortunately that means that we must look at those born before 1943 and to accuse the greatest generation if we are to be accurate.
Now from 1968 on we can start to discuss the BB.
But the reality is that few 20 somethings vote,so by that logic we can thank the BB for Reagan.
Now I know most would not be happy with that particular line of logic, but it cannot be ignored.
Of course we cannot over look all of the stupidity and sloth of the BB,because I always did believe that we had enough opportunity and training available to truly make the world a better place than we have
Taxing away the surplus to prevent compounded growth is not a new thing. Ancient Eqypt had enough surplus 4,000 years ago to waste it building pyramids. 4,000 years of growth compounded at 2% a year is a number with 34 zeros.
ReplyDelete