Gold News

Lost Decade? We've Already Had One

If we exclude government spending from GDP, we see the economy's been going nowhere for years...

I RECEIVED a letter that asked a couple of interesting questions, writes Bill Bonner in his Daily Reckoning.

Here's what it said:

(1) If we redefined GDP to EXCLUDE all government spending, because it is all "recycled" earnings of the private sector, how does the whole question of recovery vs. recession/depression look? I suspect this is one way to reconcile the fact that the financial community says we are in recovery, but Main Street says the opposite. Seems like a good topic for the Daily Reckoning.

(2) If all financial reporting were referenced to gold, rather than USD, how does the picture look? (Actually I know the general answer to this one; the economy looks AWFUL, and housing is back to pre-1990 levels.) I find it interesting that all the financial asset managers I've talked to REALLY don't like it when I ask "how is your performance relative to gold?".

As to the first question, the answer is simple. Take out the feds – who are redistributing wealth, not creating it – and US GDP growth was about zero for the last decade.

There. That's a trend. Here we are in the 21st century. With all that technology. And all that money. And all those sophisticated Wall Street geniuses allocating capital like nobody's business. And what do we get? Growth at about the same rate as during the Middle Ages.

Remember how the latest communications technology was supposed to speed up growth? How could you have forgotten? Back in the '90s it was taken for granted that faster, better communications would make people smarter, more efficient and more productive.

It was widely believed that the old ways of creating wealth – by saving, learning, investing – were obsolete. Because you didn't need savings. You could build on knowledge!

No more trial and error. Mistakes were soooo 20th century!

That's what they said.

We knew it was nonsense. Imagine Napoleon's starving, freezing troops…trapped in Russia. Those that didn't freeze to death were shot to pieces by the Russkies. Imagine giving them the blueprint to a nuclear bomb. Or even the designs for an aeroplane. Or, give them an iPad! What good would it have done them? None!

Every bit of information that is not useful is a burden.

But most people didn't see it that way. They thought the communications revolution would speed up the rate of GDP growth and make us all rich.

It didn't happen that way. The decade following the communications revolution was dry, desolate, and barren. Take out the feds' redistributed loot and the private sector registered approximately no growth at all.

It was a complete bust. A failure. A flop.

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Bill Bonner has co-authored a number of New York Times Bestsellers including Financial Reckoning Day, Empire of Debt and Mobs, Markets and Messiahs. In his own opinion, Bill's most recent title, A Modest Theory of Civilization: Win-Win or Lose, is his best work yet. Bill also founded The Agora, a worldwide community for private researchers and publishers, in 1979. Financial analysts within the group have exposed and predicted some of the world's biggest shifts since that time, starting with the fall of the Soviet Union back in the late 1980s, to the collapse of the Dot Com (2000) and then mortgage finance (2008) bubbles, and more recently the election of President Trump.

See full archive of Bill Bonner articles

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