PeakTrader.com

[administrator]

PeakTrader:

The “Misunderestimated” President:

Bush inherited the worst stock market crash since the Great Depression and a recession. However, the Bush Administration turned the recession into one of the mildest in U.S. history (which wasn’t a recession based on annual per capita real GDP growth), after the record economic expansion and structural bull market from 1982-00.

Over a five-year period in the mid-2000s, U.S. corporations had a record 20 consecutive quarters of double-digit earnings growth, two million houses a year were built, 16 million autos per year were sold, U.S. real GDP expanded 3% annually, in spite of 6% annual current account deficits (which subtract from GDP).

The U.S. economy was most efficient, while Americans stocked-up on real assets and goods, and capital was built-up. It was one of the greatest periods of U.S. prosperity, the fourth longest economic expansion in U.S. history, and in a structural bear market that began in 2000.

The Bush Administration was adept at minimizing the recession in 2008, including providing a tax cut in early ’08 for the Fed to catch-up easing the money supply, until Lehman failed in Sep ’08, which caused the economy to fall off a cliff. However, appropriate policy adjustments were implemented quickly.

If Bush could’ve been reelected and had his way, the U.S. would’ve completed a recovery in 2010, and we’d be in a strong disinflationary expansion instead of this on-going depression and “train wreck.”

******

The blame Bush mentality is still strong.

Defense budgets as a percentage of GDP were relatively low under Bush, who won two of the most decisive wars in history (defense budgets hit a low under Clinton, after Reagan won the Cold War).

Also, budget deficits normally increase in recessions, e.g. 2001, and by 2007, the budget deficit shrunk to $161 billion.

Moreover, entitlement spending helped Bush win a close election in 2004.

******

The U.S. toppled the Iraq government in a few days (or was it a few hours), and sent Saddam, and his two sons, to Allah. Also, the Taliban was toppled quickly and fled to Pakistan.

Basically, other countries got involved to create civil wars in both countries. So, we decided to defend the new governments.

------

PeakTrader:

Lyle, the math doesn’t seem to add-up. For example, in the article “Energy use in buildings to get stricter” by the LA Times states:

“The upgrades by law must be cost-efficient, and the Energy Commission estimated that the new standards will add $2,290 to the cost of a 2,200-square-foot home but will yield $6,200 in energy- related savings over 30 years.”

If I invested $2,290 in the stock market for 30 years at 8% average annual return, I’d have over $23,000.

******

The point is the money you save is less than the higher cost of living.

And here’s what Jeremy Siegel says about stock market returns:

“The average compound after-inflation rate of return on stocks from 1802 through 2002 was 6.8 percent per year, and this number has remained remarkably steady over time. A 6.8 percent annual rate of return means that if all dividends are reinvested, the purchasing power of stocks has doubled, on average, every ten years over the past two centuries…the real return on stocks since World War II is virtually identical to that prior to that war.”

******

Max, your chart starts from a peak year, i.e. 2000, after huge economic gains in the 18-year structural bull market and height of the Information Revolution.

U.S. living standards continued to improve substantially in the structural bear market that began in 2000, in part, because U.S. trade deficits reached $800 billion a year, or 6% of GDP (i.e. the U.S. consumed more than produced), while the country was at full employment, at roughly 3% real growth, after the shallow recession in 2001 (a recession so mild that per capita real GDP didn’t fall in 2001).

------

http://www.aei-ideas.org/2012/12/the-good-old-days-are-now-todays-home-appliances-are-cheaper-better-and-more-energy-efficient-than-ever-before/#comments

------