One thing this study completely misses - it’s based on a 3-4% GDP growth for the US. We’ve had 3 years in the negative or sub-2% range, and we’re going to have that for the next 3-4 years. That cuts the timeline down from 20 years to just 6 years before China passes us.
Doesn’t take very long at all, when your “competition” is doing 8-10% per year and you’re struggling to just hold at zero.
Exactly.
People (especially GOP economists and pundits) keep assuming that we’re going to be able to recover 3%+ GDP growth per annum “sometime soon.”
That’s nonsense. The pattern of western economies going through debt deflations is that, on average, the GDP output is suppressed for about 7 years, on average, with longer episodes recently very visible.
Take Japan, for an example. Their economy underwent a debt deflation in the early 90’s. They STILL have not recovered their GDP growth of the early to mid 80’s.
From this URL:
http://www.tradingeconomics.com/japan/gdp-growth-annual
Select January 1981 as the first point for the graph, leaving the back end as November 2011. You can see the clear “before” and “after” GDP growth patterns centered around their debt deflation and financial crisis.
Now, people like the libertarians (who presumably are against wholesale government spending, but alas, libertarians seem to be against government spending until their free trade theories cease functioning... then they’re willing to toss both sound money and government spending controls overboard) seem to deliberately ignore how much Japan has had to spend to prop up their economy to achieve only 2%+ GDP growth, on average. The debt:GDP ratio is over 220% in Japan. They’ve gone from being only 30% debt:GDP in the late 80’s to 220%+ now. And now they’re deliberately gutting the yen to prop up their export market(s), but most especially their exports to the US.
The clowns who are really out the window are those who claim that their assuming 4% GDP targets - eg, Paul Ryan. These people are living back in the pre-2000 days.
http://www.tradingeconomics.com/united-states/gdp-growth
Configure this chart to ask for GDP’s from 1947 to today. You can see two real turning points in the US economy:
About before 1986, we not only had quarters where we’d have 4%, we would have quarter-after-quarter of more than 4%. We had quarters of 10% GDP growth, which are now flights of imagination any more.
After 1986, while we still achieved quarters of 4 to 5% frequently, there became no quarters of > 9% GDP growth any more.
After 2000, we see only two quarters of 5% GDP growth. Most quarters are under 4% - they’re somewhere in the 3%+.
Going forward, I would now expect the 3% quarters to be unusual, and we’re now stuck in Japan’s situation of mediocre growth, much of which is dependent upon government spending.
Huh?