Aug 19, 2014
|1 year||0.11%||2014||0.11% (actual)|
|4 years||1.1% (implied)||2017||2.00%|
- Growth will remain low. Unfortunately, the 2019 date is consistent with my calculations of when labor markets return to normal, based on jobs growth versus population growth, corrected for baby boomer retirement, updates of which I post here from time to time.
- We will not have inflation in the foreseeable future. None. (Remember, short-term interest rates should be approximately the growth rate plus the inflation rate.) Yes, there's lots of noise from gold bugs. There are the "old dog" monetarists (those who blindly apply a single, simple-minded monetarist equation, as fitted to data from the 1950s). They play with a few billion dollars. In contrast, the real players, pension and insurance fund managers, mutual fund managers and the Saudis and Chinese have invested a few trillion dollars on the belief that there won't be inflation. I believe money talks.
- Stock prices will remain high and returns low. Low growth means that profits won't rise much, while low interest rates mean that stocks will still look attractive relative to bonds and bank accounts.