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  • Hi Scott!
    Great article.....I really liked it.
    The first part....falling income...no surprise there. My check seems to pay less bills than in years past. No structural changes.....someone would lose.....those in power....not a chance! We have to save the spenders 'cause we have to. The savers will still save.....no loss there. From here on is a post I was going to do yesterday but, alas, it wasn't.

    I have seen that Barron's has said a novel explanation for the weakness this week could be because companies stop buying their stock....due to earnings, since they must stop 5 weeks before they release them, or something like that. Could this be? Have we come to this from QE? I'm not sure what to think about this. Is this all companies have to do with their money or debt? Is there nothing else? Even Duke is appalled at this....the dog is in a tizzy over this. I know my company has been slowing since 2013 with no end in sight. Methinks something ugly will come this summer......too many headwinds makes for a slow boat to China. I see no sunshine right now...maybe it's just me. Just pondering things, I guess.
    God bless.
    the Pudd
    p.s. Reminds me of the 7 years of fat followed by the 7 lean years (think Egypt and Joseph).
  • MJG
    edited March 2015
    Hi Scott,

    Thank you for the reference; I don’t usually access Guggenheim Partners’ articles.

    Notwithstanding the articles conclusion, I’m much more sanguine about our long-term growth rate prospects than the author is. From earlier posts, you know I distrust forecasts; forecasters can’t forecast. The referenced piece does nothing to dissuade me.

    Yes, the various QE packages have lowered long-term interest rates. Yes, real median family income has been stagnant over several decades. However, the bulk of economists and bankers failed to predict these outcomes, neither direction nor magnitude. Predictions are hazardous duty and totally unreliable.

    I’m almost always of a mind that QE spending by government is less efficient than investment spending by private individuals or corporations. It is not that government spending is totally wasteful; it is not. It is a matter of efficient and effective deployment of resources, and private incentives are more focused with less distorted and corruptive pressures.

    The recent US history of Stimulus and QE spending provides ample experimental evidence of funds allocated to short term benefits with little largesse committed to economy stimulating projects. Shovel-ready projects were more an illusion than a reality. Near nothing of lasting economic value was achieved by these projects.

    The impact of all global QE expenditures on our future living standards is nebulous at best. Scale is important here. The sizes of the various QE packages were small when compared to global GDP. In fact, if you are from the Keynesian economics school, you would be tempted to argue that failures were caused by an insufficient funding commitment.

    My perspective is that the global QE expenditures did some current and local good, but were inadequate to drive us off our present economic lethargy. Does that mean we have less to spend down the road? Marginally yes, but the shortfall is swamped by the overall growing global GDP, and the uncertainties of that future growth rate.

    As a departure point, I anticipate that the US economy will grow at an annual GDP per person rate of its historic 3% level, 2% from productivity enhancements, and 1% from demographics. Perturbations always exist since it is never a smooth upward ride. The QE experiments are merely minor perturbations and will be lost in the future’s noise.

    Scott, I’m sure you understand that I’m not an economics expert. I did take a few engineering economics classes while in college; even these were micro and not macro-economically oriented. I know you will read my perspective with a needed huge grain of salt given my lack of formal qualifications.

    Economic revivals will happen independent of any QE promises. That's the world's history.

    Best Wishes.
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