The Quiet Death of the American Dream

American per capita GDP rose an average 2.2% a year between 1947 and 2000. But it’s only averaged 0.9% since 2001, says The New York Times.

1.3% doesn’t sound like much. And from one year to the next, it isn’t. But repeat it every year for 50 years and…

U.S. per capita GDP was about $45,000 at the turn of this century. But as the Times shows, if the economy grew an annual 0.9% between 1947 and 2000 instead of 2.2%, U.S. per capita GDP would have only been about $20,000 — 2.25 times less than it was.

Some countries with per capita GDP 2.25 times less than the U.S.: Greece… Kazakhstan… Latvia… Chile.

Post-2001 America is Greece compared with 1947–2000 America.

Where have you gone, Joe DiMaggio?

Heaping Pelion upon Ossa (Greece again), the McKinsey Global Institute turned up this bitter morsel: Cited in the Times article, it says, “81% of Americans are trapped in an income bracket with flat or declining income over the last decade.”

Yet the money supply has roughly tripled since 2001. Explanation, Janet Yellen? How about you, Ben Bernanke?

We’re not sure either could tell A from B at the price of their souls. And even the Fed’s most dedicated apologists are beginning to cough sadly behind their hands.

So if the Fed can’t breathe life into the corpse, what can?

Structural changes. 

“The key is growth. The problem is we can’t do it by printing money,” explains Jim Rickards. “The current economic slump is not cyclical; it’s structural. This is a new depression that will last indefinitely until structural changes are made to the economy.”

Structural changes? Overhauling the tax code, gutting useless regulation, reforming entitlements. These sorts of things. Bringing the Keystone pipeline online is another.

Jim says Japan’s been in a depression for 25 years because they haven’t made the required structural changes to their economy. And he says, “The U.S. is now like Japan.”

Jim also says structural changes require action from the White House and Congress. But since they’re “not talking to each other,” he has little faith they’ll happen. And imagine if Trump gets elected! Or Hillary!! Congress might as well go fishing for four years (come to think of it…).

Absent necessary structural changes, the future may be a marathon run of low growth, stagnating incomes… and the Japanification of America.

Here we have a picture not of sudden collapse but of gray sludge and twilight. Of a long, drizzly November. Of a cold that never ends.

“It’s never paid to bet against America,” said Warren Buffett. It’s not always a smooth ride, adds the Sage of Omaha… but “we come through things.”

Will it come through this?

Regards,

Brian Maher
Managing editor, The Daily Reckoning

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