Two pieces from today's Ottawa Citizen. The first is about the young who, try as they might, can't really find a themselves or a sense of purpose in today's economic world. Follow the URL for that one. The second, copied from the paper, is a Bloomberg article on what one economist, Robert Gordon, sees as the death of growth. If what he predicts is really coming, every basement will have at least one basement boy (or girl) in it.
Ed http://www.ottawacitizen.com/life/Boys+basement/7834172/story.html Is Growth Dead? LONDON During the course of 2012, the U.S. economy rebounded with all the vitality of a slug waking from a long nap. In debt-strapped, recession-hit Europe, investors fret about a Spanish bailout, a Greek default and whether the euro itself will shatter. In Asia, slowing growth in China and India has called into question the national narratives of the two emerging-markets giants - and dragged down earnings and commodities prices around the globe. If all of that weren't bad enough, last summer saw the publication of a much-talked-about paper by Northwestern University economics professor Robert Gordon titled, Is U.S. Gordon doesn't mean over in some happy-days-aren't-quite-here- again-yet-just-wait-another-quarter kind of way. He means over as in finished, fin- ito, happy days ain't never coming back. "Future growth in real GDP per capita will be slower than in any extended period since the late 19th centur' he writes. The 72-year-old macroeconomist elaborated on his argument in an email exchange with Bloomberg Markets. "The inevitable decline in future growth required by the need to reduce government and consumer debt will güarantee a contentious political landscape, not just over the next year, but over the next several decades," he said. With all of this evidence of crushing stagnation, it's surprising, or at least contrarian, that this year high-powered World Economic Forum in Davos, Switzerland, should take place under the cheery rubric Resilient Dynamism. The logic of the organizers, as spelled out in the program for the Jan. 23-27 event, is that hard times require "successful organizations to master strategic agffity and to build risk resilience?' The corporate leaders of those organizations won't find much cause for optimism in Gordon's work. He starts out with a baseline projection for growth in U.S. real gross domestic' product per capita of 1.4 per cent per year during the next 15 years. That's more than one full percentage point lower than the average growth rate the U.S. experienced from 1928 to 1950 and four-tenths of percentage point lower than the average annual growth from 1987 to 2007. Wait, it gets worse. In his paper, Gordon identifies six "head winds" that he says will subtract from U.S. growth: an aging population, declining educational attainment, rising income inequality, increasing offshoring and automation, climate change and the prospect of a carbon tax to combat it, and the high debt burden on both households and the government. Together, he says, these head winds could flatten 1.4 per cent growth to near zero. Gordon argues that extremely low growth rates were the norm in earlier periods of human history - he cites data from British researchers showing that England's GDP grew only 0.2 per cent per year on average from 1300 to 1750- and could be the norm again. Other economists extend Gordon's thesis to Europe and beyond. The forecast sets off alarm bells for Bill Gross, Co chief investment officer at Pacific Investment Management Co the world's largest bond investor. "A one per cent differential means a lot in terms of unemployment, and it means a lot in terms of profits:' Gross says "Corporate profits grow more after overall economic growth hits two per cent Below that, they stall out" Gross is among those who think Gordon is onto something. He says he wornes that as growth ebbs, the US and most developed economies will be tempted to paper over the problem by printing money, as they have with recent quantitative easing policies. That will eventually mean higher inflation, the nemesis of bond investors, which is why Gross says he's looking for returns in frontier markets and in real assets, such as cornmodities. The idea that the world has reached the limits of growth has a long pedigree, running from Thomas Malthus m the late 18th century to the Club of Rome in the early 1970s. All of these doomsayers wound up looking like Chicken Littles. Concerned primarily with resource scarcity and overpopulation, they underestimated mankind's capacity to innovate and find new ways to stretch supply-be it food or fossil fuels - to meet demand. BLOOMBERG NEWS
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