What will the future bring for the US economy? I'm talking long term here, not the next quarter.
Here's my model: Japan. The chart below is Japanese GDP in current yen - the economy has been "stagnant" (I very much prefer "stable") for 25 years. And, honestly, I think that's the best case scenario because, unlike the US, Japan is a socially homogeneous society that very rarely exhibits the kind of fractious politics common in America - at least after the Meiji Restoration in 1868.
Can the US survive a flat economy for decades? Yes, but only if its politicians and society realize that the alternative is much, much worse, and cool down their extremism on both sides.
There's another reason for the US to embrace a flat economy: Global Climate Change. Or, as I prefer to call it, Human Biosphere Annihilation. In short, if our species doesn't halt Permagrowth it is headed for extinction.
https://www.youtube.com/watch?v=lQQPicCoaG4
ReplyDeletestarts at 00:22... there is a time scale in the comments...
I agree with him... what we are seeing is not some abstract economic force. It is about a generation that made a conscious decision to eat its children. And yes, the Japanese made the same decision... if you talk to a young Japanese, you can hear their bone deep hatred for the old..
Japan's population in 2022 is the same size as 1989 although demographics is much older today. It's GDP has grown 28.6% between 1989 to 2021 while Inflation has risen just under 15%. (Inflation in the US has more than double!) I'm not sure if that "stagnant" growth is "bad" all things considered.
ReplyDeleteIn the last 25 years (1998-now) Japanese GDP in current yen (ie not adjusted for inflation) has gone from 538 trillion Y to 546 trillion Y. In other words, almost completely flat (+1.5%), with minor ups and downs in between (except during COVID).
ReplyDeleteIn the same time CPI has gone mostly down (disinflation) by about -2% and now stands at +3.5% higher than 1998.
Basically the Japanese economy has been flat as a pancake... nevertheless, it is still one of the most civilized, prosperous, developed and peaceful nations in the world. If only the US could match it..