The chart of the decade
The chart of the decade
Today doesn’t just mark the end of 2019, but the end of the 2010’s as well. So it’s only suitable that I post the one chart that I think most explains the economy over the past 10 years.
In terms of public policy, that chart would be of the continual explosion of income and wealth inequality, particularly at the very top 0.1% or 0.01% of the distribution.
But in terms of explaining why the economy has chugged along at roughly 2% GDP growth every year for 10 years, with no recession, the below graph, that was part of my year-end review last week, sums it up nicely. Here it is again, the YoY changes in the Fed funds rate and the YoY% change in the price of gas:
What generally kills economic growth is either a sharp change in the cost of financing and/or a sharp increase in the costs of inputs. In the 2010’s we never had either. In 2018 we came close, particularly in a YoY change in gas prices, but it was an increase from a very low level, and it didn’t last that long.
This very long moderation in both interest rates and important commodity prices is the most basic explanation for the fact that the expansion that started in 2009 is still going on as we begin 2020.
See you on the other side. In the meantime, Happy New Year!
Excessive leverage is more important. It’s been slowly building onto a platform of excess.
Look at the amount of debt created at the private, corporate and public level in this decade under observation. Then look at your observation about low input costs, then ask yourself if its normal that with such low input costs and so much easy money an economy keeps growing at 1.5 /2% for a decade? then if you are willing to agree that the 1.5 / 2% are questionable numbers and that also the 2% inflation is debatable, you may now ask how is it possible we had 0% real growth in such “favourable” conditions….
Fabrizio:
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