“Secular Stagnation” Is Nonsense… Here’s the Real Reason Behind the US Downturn, by John Mauldin

Secular stagnation seems to have a strong correlation to an increasing share of the economy by the government. Must be a coincidence. From John Mauldin at mauldineconomics.com:

My good friend Charles Gave recently wrote an instructive article titled “Tale of Two Countries.”

In the UK and France, structural growth rates have diverged since 1981. The rate has fallen by two-thirds in France, while in the UK it has risen.

Why?

Well, to begin with, in the UK, Margaret Thatcher was elected prime minister in 1979. She reduced the role of the bureaucracy in managing economic activity and dialed back government spending as a percentage of GDP.

Meanwhile, in France, François Mitterrand was elected president in 1981 on a platform that expressly aimed to expand the scope of government.

“The effects on growth were predictable,” says Charles.

Meanwhile in the US, when government spending as a percentage of GDP shot up from 33% to 39% during the Great Recession, our growth rate fell from 2.5% to less than 1%.

And that, says Charles, is the story on US stagnation.

Now, without further ado, I’ll let Charles unpack his intriguing narrative.

So We Are In Secular Stagnation…

By Charles Gave
June 19, 2017

…really?  I would advise readers to consider the chart below.

On first blush, its lower pane supports the stagnationist camp. After all, both the US and France have seen a slump in their “structural” GDP growth rate, as shown by the seven year moving average. Since 1977 this measure has fallen by a third in the US, and by two thirds in France. Yet, look at the chart’s top pane and it is clear that this growth slump has hardly been generalized. Since the late 1970s, Sweden, the UK and Switzerland have seen their growth rates rise structurally, and the same pattern can be found with Canada, Germany and Australia.

To continue reading: “Secular Stagnation” Is Nonsense… Here’s the Real Reason Behind the US Downturn

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