Thursday, December 08, 2005

The economy is proving as unstoppable as the 11-0 Indianapolis Colts. Link. That's how I like to get my sports news... as bad analogies in the econ reporting.
That my hometown team is unbeaten isn't news. That the US economy is growing at 3.7% annually isn't exactly news either. If (1.037) to the twentieth = about 2.0, that's a doubling time of 20 years, 2025. Some argue that outdated figures like GNP and GDP only capture about half the real growth.
And then I can construct, before deconstructing, an argument that shows a doubling of income in 20 years would be transformative. Because income goes to necessities first and then a mix of disposable income and savings. If the cost of meeting today's necessities stays about the same, the doubled income goes rushing into disposable income (and savings.) Say currently Joe Consumer makes 30,000, spends 10K to live, saves 3k, has 17 in disposable income. Double to 60K, - ten K to live, 6k in savings, 44K in disposable income an increase of .. ok, only a bit more than 2 1/2 times...
Anyway, fixed expenses aren't really fixed. Most of the world lives on $4000/yr or less.Anything over $4000/yr is disposable income. The rent, the car payment, all disposable options. It's a mater of lifestyle choices. So in 2025 our sense of what is a necessity will have changed. Jet insurance. Designer pets. Who knows.
But anyway, the point is that if the economy is doubling in 20 years, and people are living 77 years, that's about 4 doublings. That's a 16-fold increase per lifetime.
The future does not look like the past. That's if the rate stays a measly 3.7 percent annually. Instead, growth feeds on growth, as the singularity grows nearer.
The use of USA growth is one of the weakness of this analysis, which hasn't even touched on tax policy. That's because the economy treats taxes as damage, and routes around it, as with my earlier post on medical tourism. Where it can, taxation will grow to suck up all growth in the economy. That was the 20th century - huge growth in the world economy, much of which went to empower governments. The trends - russia, china, usa - tend to be about disempowering governments, and the UN isn't yet a serious threat of the global state leviathan.
Reporting from Indianapolis, I'm an arbitrary aardvark, and that was sports highlights.

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