6 Reasons Bernanke Is Wrong, And The Future Is Going To Be Bleak

TBI ^ | 5-21-2013 | Rob Wile

[blam]

6 Reasons Bernanke Is Wrong, And The Future Is Going To Be Bleak

Rob Wile
May 20, 2013, 10:10 AM

Saturday morning, Federal Reserve Chairman Ben Bernanke told graduating Bard College students why he believes the future will be better.

In theory, this is a pretty banal argument, especially in a graduation speech.

But it looks a little different coming from an conscientious academic.

Halfway through the speech, Bernanke presents the evidence of those who argue against this view — that actually, our best, most innovative days are way behind us.

In a footnote, Bernanke discusses the folks he's really calling out.

Among them is Robert Gordon, who last year published a paper highlighting not one but six headwinds that suggest future growth will pale in comparison to the advances of the 20th century's technological advances and subsequent GDP growth.

The headwinds are:

* The end of the “demographic dividend”
* Rising inequality
* Input price equalisation stemming from the interplay between globalisation and the internet
* The twin educational problems of cost inflation in higher education and poor secondary student performance
* The consequences of environmental regulations and taxes that will make growth harder to achieve than a century ago
* The overhang of consumer and government debt

Here is the chart Gordon uses to make his case, showing real, relative GDP growth over the past few centuries.

It's basically what Bernanke is arguing against:

CEPR

Gordon writes:

...doubling the standard of living took five centuries between 1300 and 1800. Doubling accelerated to one century between 1800 and 1900. Doubling peaked at a mere 28 years between 1929 and 1957 and 31 years between 1957 and 1988. But then doubling is predicted to slow back to a century

(snip)

[blam]

Bernanke Is Drunk On Optimism And His Faith In The Future Is Frightening