One of the biggest promises made in US elections (not just in modern times) is a guarantee that the economy will be fixed and GDP will grow rapidly. It is a novel idea to pick up GDP (or Gross Domestic Product) growth, for a developed nation like the United States, small, yet positive, GDP growth for each consecutive quarter is truly all you can ask for -- to have the same growth as China, not only would you have to have a massive population, but also constant building and production and a way to make sure that this growth stays consistent in perpetuity.
The thing is, eventually you will run out of land, resources, and customers, and then there will either be consistency or contraction. China has attempted to boost growth far beyond what is necessary in order to make it look like their economy is strong. Have you ever seen those photo albums of ghost cities in China? Mass industrialization has caused developers to build whole cities with the anticipation of more growth, only the growth has yet to happen...nor will it ever happen. As a result, you have tons of huge empty cities that were built for nothing.
While Mr. Trump is seeking a 4.0% annual growth rate in GDP for the US, I have to ask, why? Are we trying to make up for growth lost from the recession? Or are we just trying to prove something to China?
The most recent GDP numbers showed that the US economy expanded by 1.7% in the third quarter of 2016 compared to the same time period a year earlier. Meanwhile, the Federal Open Market Committee (FOMC) raised its GDP growth forecasts for all of 2016 to 1.9% from 1.8% in the September projection and for 2017 to 2.1% from 2.0% previously estimated.
For some historical reference, the GDP Annual Growth Rate in the United States averaged 3.2% from 1948 until 2016 -- keeping in mind that several wars and industrial booms occurred during this time. US GDP growth reached an all time high of 13.4% in the fourth quarter of 1950 and a record low of -4.1% in the second quarter of 2009 -- the only major US recession since the 1930's, and even then the GDP figures were not documented.
The United States is the world’s largest economy. Yet, in the last two decades, like in the case of many other developed nations (UK, Germany, France, etc.), its growth rates have been decreasing. If in the 50’s and 60’s the average growth rate was above 4 .0%, in the 70’s and 80’s dropped to around 3.0%. In the last ten years, the average rate has been below 2.0% and since the second quarter of 2000 has never reached the 5.0% level.
So basically, we are trying to achieve an average growth rate last seen during the Korean War and the Post-WWII Baby Boom. How on Earth is that going to happen?
There can't be a real consistent trend in US GDP growth rates, as this chart demonstrates. As time goes on, the range fluctuation contracts. All we should really be focused on is keeping the level at or above 0.0%. This 4.0% goal is, quite frankly in the eyes of economists, unrealistic.
Even though China's GDP data started being documented in 1990, the country has has some major fluxes, and its efforts to maintain high growth has also been in vain. So if you ever read about "investing in China for growth," clearly we ALL missed that boat.
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