Monday, November 26, 2012

Jeremy Grantham on American Economic Growth


After my previoust post commenter JP linked to a recent report by Jeremy Grantham on America’s economic future.

Effectively, the Grantham report is very important and very interesting. I do not want it to get lost in the comments section, so, with thanks to JP, I am giving it its own post.

I will spare you a summary, but will note that Grantham sees America entering a period of substandard economic growth. I would add that he is one of the most respected investment advisers in the world. Serious investors take his opinions very seriously, indeed.

This one is well worth a read and your attention.



11 comments:

Anonymous said...

A good find! He looks like an analyst with similar concerns as me, although I have no interest in investing. I found a recent Panel discussion with him:
https://www.youtube.com/watch?feature=player_detailpage&v=eTr6IaSzMZU#t=824s

-Tom

Anonymous said...

And another presentation. He calls himself a Malthusianism, concluding that growth and sustainability are incompatible. A similar conclusion I've reach, even if the timing is in question.

https://www.youtube.com/watch?v=k_bRyiVaD5M&feature=related
Jeremy Grantham, Director, The Grantham Foundation for the Protection of the Environment

I'd miagine he can't be allowed to be popular with the Conservative Right in America which says Capitalism can solve all problems if government just gets out of the way.

-Tom

Anonymous said...

I think he would be labeled as a socialist by anyone on the Right now a days...

2010-11-11 - Jeremy Grantham - Interview, 3 parts:
CNBC's Maria Bartiromo interviews GMO strategist Jeremy Grantham who discusses the Fed's policies and its effects on the stock market.
https://www.youtube.com/watch?v=DRYwIOyTccg
https://www.youtube.com/watch?v=JQWQgdK27R0
https://www.youtube.com/watch?v=GQzX-wOKgpc

It sounds like Paul Krugman would agree with 90%, in long term and short term policy,... and maybe so...
http://krugman.blogs.nytimes.com/2011/05/03/resources-inflation-and-monetary-policy/
"I’ve been getting a number of requests that I say something about the implications of the widely publicized Jeremy Grantham piece arguing that we’ve entered a new era of resource scarcity.
"I’m broadly sympathetic to this view — in fact, I’ve expressed quite similar views. I am, however, much more optimistic than Grantham seems to be that we can combine a shift toward conservation with continuing economic growth."

Anonymous said...

Yep, case closed! He is a socialist!
--> People now see it is a system for the rich only, By Jeremy Grantham
http://www.ft.com/intl/cms/s/0/c6260c0c-4cb7-11e1-8b08-00144feabdc0.html#axzz2DNgAWJHI
"But the best propaganda of all is that the richest 400 people now have assets equal to the poorest 140m. If that doesn’t disturb you, you have a wallet for a heart. The Occupiers’ theme should be simple: “More sensible assistance for the working poor, more taxes for the rich.”"

Stuart Schneiderman said...

His politics and his views on investing are not quite the same thing... If I remember correctly, he manages money for Dick Cheney.

David Foster said...

There are plenty of things wrong with Grantham's analysis, and I'm going to be doing a post about this at some point. But for starters:

1)The assumption that fertility rates are going to stay low...Susan Walsh has linked several surveys suggesting that young women today have an increased interest in marriage/family; likely this is a leading indicator of fertility rates.

2)The confident assertions about low services productivity growth over the next 40 years, using things like hair cutting as examples...the services sector also includes things like transportation and banking, which have all kinds of productivity-improvement prospects.

In general, Grantham's analysis suffers from too much linear extrapolation, too little focus on the relationships *between* the factors that he is using as drivers and the feedback loops that exist in the real society and economy.

If we do have 40 years of low growth, it will be because of bad political decisions and malign cultural influences, not any automatic written-in-the-stars process.

David Foster said...

Comes now General Electric, with some rather more optimistic thoughts on productivity growth. Haven't read it yet, but looks like the report contains some interesting data even if the hype level is a little high.

http://files.gereports.com/wp-content/uploads/2012/11/ge-industrial-internet-vision-paper.pdf

Stuart Schneiderman said...

Thanks, David.

For my part I find some of the analysis fanciful, as you do. On the other hand, I think that it's been well established that excessive debt severely dampens economic growth, without too many of the other factors entering in.

I have no idea whether fertility rates are going to stay low. They are certainly low in Japan and many parts of Europe. They are one factor contributing to the debt crisis Southern European countries are facing, but they are certainly not the only factor.

Southern European cultures place less value on frugality and industriousness than do their Northern Counterparts.

Similarly, South American cultures skew away from frugality and industriousness. If America is receiving a large number of immigrants from those countries, one would expect something similar to happen here.

In any case I don't care too much why Grantham thinks it's going to happen... I think that he's still on to something.

I'll look forward to your post.

Bizzy Brain said...

He had me quite interested until he went off on the global warming tangent. At that point, I questioned the validity of his other arguments. Also, no mention of Obamacare and its deleterious effects on growth.

Phil L. said...

Agree with Bizzy. Full of crap on global warming, probably full of crap in other areas.

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