Friday, October 7, 2011
Economic Growth is all that matters. Everything else is just a side show.
Click on this graph. What I have done here is create a graph of the future path of our GDP at two different rates of growth. One is at around 3% and the other around 2% and then let them compound for 50 years. Look at the difference. One economy is 50% bigger than the other. How many of all the entitlement promises we have made can we pay for in the future if our long-run rate of growth were to fall by 1%. Not pretty is it? Well this is what I fear most (other than the ghosts of my sordid past). Well, think of the top graph as the US economy between 1980 and 2008. Think of the bottom economy as France and the growth paths match up pretty well. Still think 1% doesn't mean much?