From Barron’s Stephanie Pomboy: A Grim Outlook for the Economy, Stocks by Leslie Norton
The statistics bear this out. Over the last four years, U.S. nominal GDP growth has gone from 4.3% to 4.1% to 3% to 2.4%. The deflator, the inflation we are supposed to be targeting, went from 1.9% to 1.6% to 1.5% to 1.1%. What greater proof do you need that lower rates aren’t helping and, to the contrary, are making things worse? Growth and inflation are slowing, and it has to do with this aging demographic. Add the emotional and financial scares from the housing-bubble bust, and policy makers have really got it ass-backwards. They’re taxing the economy, not stimulating it.
Ms. Pomboy suggests that in the light of the demographic slowdown, low interest rates may be doing much more damage than good. They are supplying yesterday’s solutions to today’s problems- a major reason I believe Progressivism is exhausting itself
One problem with low interest rates is that it is pushing some folks into risk profiles unsuitable for their station. This will make the next recession, whenever it is, much more painful.
But the government is caught is a Catch 22- if interest rates climb the debt soars out of control. If they remain too low significant groups like the retired, and the essential growth in pension funds, creates a different but significant liability. By their nature government solutions to short term crisis tend to ignore long term consequences. As the crisis grow ever more frequent there is never enough time to recover in order to return to normal.
The mating call for progressive policies was the infamous quote from John Maynard Keynes, “In the long run we are all dead.”
Try telling that to your kids.