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Zeitgeist: Slow Growth/No Growth future


Liberty
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I just want to throw this out there for discussion... I don't have a real answer, just a question...

 

It seems like there are more and more people in the media who predict a slow growth or no growth future. Various big money managers saying that in interviews, economists are publishing papers, journalists writing pieces about it, etc.. Here's an example of what I mean, but I'm sure you can all think of other examples.

 

http://opinion.financialpost.com/2012/10/05/and-now-peak-growth-theory/

 

At first it was only a few people here and there, but now this point of view is becoming more and more common and accepted. My contrarian side makes me wonder if maybe this could be one of these cases where the generals are ready to fight the last war and 'everybody agreeing on something' almost means that something else will happen (self-defeating prophesy? kind of like the opposite of a bubble...).

 

I don't really know. Maybe all these people are right... But I feel like there's a real chance that things won't be nearly as bleak as some people forecast because people tend to extrapolate linearly, but history shows that things change in a non-linear fashion (ie. slow progress for a long time, then lots of progress in a short time, etc).

 

Just curious to hear what others think about this new "no growth/slow growth" meme that is increasingly prevalent in the media..

 

edit: btw, here's what I'm not saying: I'm not saying that suddenly growth will pick up like a rocket or that everybody's wrong and everything's actually fine. Like everybody, I can see the big problems everywhere and slowing growth and need to deleveraging. I'm just saying that history has shown us that it's pretty much impossible to look very far ahead, and that often when everybody thinks something will happen and modifies behavior because of that belief, it doesn't. I'm making an effort to stay in the 'I don't know' camp and not position myself too much in either direction.

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It seems like the deleveraging cycle we're going through has to last a while longer and resultingly, we won't have a lot of general growth in the next few years.  After that though, it seems like prospects should be generally agreeable (e.g., still have technology going for us).

 

I'm not sure how long that first phase will take though.

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We are in for a slow growth period until the debt deleveraging cycle is over.  Let's face it, much of the growth from the past 20 years has been paid for by increasing debt.  That cannot continue forever.

 

The average US citizen is more develeraged than their Canadian counterpart.  In Canada we are facing a real estate crisis, falling commodity prices, and an average consumer who is debt up to their eyeballs.  I noticed the Fairfax increased their short position by adding the TSX index just recently.  I imagine that will grow over time.  Before that they were only short the Russel 2000 and another index, I believe.   

 

Slow/no growth is a real possibility for at least a couple years.  Consumer is tapped out.  Canada is in big trouble.  I am bullish on U.S. two years out, but until then it will likely be slow growth. 

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You guys don't have to try to convince me, I've heard all these arguments and I'm not saying I disagree with them. I'm just trying to be meta about this and see if people might be overconfident in their extrapolations over too long a period ahead.

 

It's fairly clear what the short-term will be, but over a certain amount of time, I think there's a real fog, and all kinds of unpredictable things could shock the system and change the trajectory, yet people seem to want to predict the next 5-10 years as if that had ever worked in the past.

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