You Can Make Plenty Of Money In A Slow-Growth Economy
David Trainer
I am optimistic about the U.S. economy and I don’t believe we are in a bubble. Too many investors and economists are looking at the economy the wrong way. They see slow growth in GDP and employment and assume these are bad for the health of our economy. They look at the S&P 500 surging upwards and say it is caused by the easy money policies of the Fed, not the underlying profitability of these companies.
My response to these arguments is that slow growth can be better for the long-term health of an economy than rapid growth. Just look at the last couple of bubbles. GDP grew by nearly 5% a year and unemployment was at 4% in the late 1990s, and we all know how that turned out.
Rapid growth is not always healthy for an economy in the long-term, while more measured growth can be an indication that resources are being allocated more efficiently. I believe what we’re seeing now is the allocation of both human capital and business capital becoming more efficient.
The slow level of employment growth is not a sign of a stagnant economy. It is the result of significant transition as people are learning new skills to suit more productive jobs. The jobs that were lost when the last bubble burst are not the same ones coming back, and that is a good thing. Read more »»»
