Young Research & Publishing Inc.

Investment Research Since 1978

Disclosure

  • About Us
    • Contributors
    • Archives
    • Dick Young’s Safe America
    • The Final Richard C. Young’s Intelligence Report
    • You’ve Read The Last Issue of Intelligence Report, Now What?
    • Dick Young’s Research Key: Anecdotal Evidence Gathering
    • Crisis at Vanguard
  • Investment Analysis
    • Bonds
    • Currencies and Gold
    • Dividend Investing
    • ETFs & Funds
    • Investment Strategy
    • Retirement Investing
    • Stocks
    • The Efficient Frontier
  • Investment Counsel
  • Dynamic Maximizers®
  • Retirement Compounders®
  • Free Email Signup

The 2% Economy

July 31, 2015 By Jeremy Jones, CFA

The latest GDP report came out yesterday and it showed economic growth of 2.3% in the second quarter. First quarter GDP was revised up from a drop of .2% to a gain of .6%. Yesterday’s release also included the BEA’s (Bureau of Economic Analysis) annual revisions to GDP. The annual revisions incorporate newly available, more accurate, and more complete source data.

What did the revisions show? This won’t come as a surprise to Mom and Pop on Main Street, but economic growth over the last few years was weaker than originally reported. The compounded annual growth rate of GDP from 2011-2014 was revised down to 2% from 2.3%.

The biggest downward revision (-.7%) came in 2013—the height of the Federal Reserve’s most aggressive bond buying program in history. Way to go Ben and Janet!

It was also noteworthy that GDP growth in the third quarter of 2012—the quarter just prior to Obama’s reelection—was revised down to a dismal 0.50% from an originally reported 3.1%. Probably just a coincidence though. 😉

My chart below shows growth in annual GDP since the recovery began. Since the recovery started, we haven’t broken through 3% growth in a single calendar year. The highest rate of growth achieved in any calendar year was a depressing 2.5%.

chart

If Yellen & Co., were looking for an excuse to further delay an increase in interest rates, the BEA’s annual revisions just came to their rescue. To the Fed’s way of thinking at least. With years of evidence now under our belts, it is hard to see any benefit to the real economy from zero percent interest rates and trillions in money printing.

As you can see on my display, in the year following the Fed’s QE2 program, economic growth actually sank instead of increasing. And during the height of the Fed’s QE3 program, the economy experienced the worst growth rate of the recovery. Sooner or later, the Fed is going to have to come to terms with the fact that money printing does little for the real economy and that a prolonged period of zero interest rates may do more to harm growth than stimulate it. This may sound counterintuitive until you consider the impact that prolonged periods of zero rates can have on lending decisions—the most powerful mechanism for transmitting monetary policy.

The bottom line for investors: the GDP revisions likely give the Fed an excuse to further delay a rate hike. Whether or not they take the bait is still to be determined. Stay attuned here.

Share this:

  • Email
  • Twitter
  • Facebook

You Might Also Like:

  • Consumer Economy is Hot
  • More Good News for the Economy
  • Janet Yellen & the Origin of the Populist Backlash
  • Author
  • Recent Posts
Jeremy Jones, CFA
Jeremy Jones, CFA, CFP® is the Director of Research at Young Research & Publishing Inc., and the Chief Investment Officer at Richard C. Young & Co., Ltd. Richard C. Young & Co., Ltd. was ranked #5 in CNBC's 2021 Financial Advisor Top 100. Jeremy is also a contributing editor of youngresearch.com.
Latest posts by Jeremy Jones, CFA (see all)
  • Now You Can Own Your Vacation and It Doesn’t Have to Be a Time Share - May 24, 2022
  • Big Banks Adopting Blockchain for Short-Term Trading - May 23, 2022
  • BULLWHIPPED? Inventory Overhang Could Slow Growth in Certain Sectors - May 20, 2022

Search Young Research

Most Popular

  • MARKET CHAOS: This May Take Time, Here’s How to Prepare
  • PRICES SOAR: Diesel Shortage Could Cripple America's Economy
  • Your Survival Guy: “Sell in May, Buy After Labor Day?”
  • All-Powerful Money Managers Voting YOUR Money Targeted by Senate GOP
  • Institutional Investors Fall in Love with Oil, Again
  • COMMODITY CRUNCH: Will Tesla Buy a Cobalt Mine?
  • The Power of a Compound Interest Table
  • CRYPTO: Has the Fire Gone Out?
  • The Innovation Bubble Goes Bust
  • HORDING CASH: Funds Hold the Highest Level of Cash Since 9/11

Don’t Miss

Default Risk Among the Many Concerns with Annuities

Risk and Reward: An Efficient Frontier

How to be a Billionaire: Proven Strategies from the Titans of Wealth

Could this Be the Vanguard GNMA Winning Edge?

Cryptocosm and Life After Google

Warning: Avoid Mutual Fund Year End Distributions

Is Gold a Good Long-term Investment?

How to Invest in Gold

Vanguard Wellington (VWELX): The Original Balanced Fund

What is the Best Gold ETF for Investing and Trading?

Procter & Gamble (PG) Stock: The Only True Dividend King

The Dividend King of the North

You’ll Love This if You’re Dreaming of an Active Retirement Life

RSS The Latest at Richardcyoung.com

  • The Supreme Court Must Always Protect the Constitution
  • Our Daily Bread Threatened?
  • Watch Out for Your Worst Enemy
  • Farmer Tells Steve Bannon Biden’s Inflation Is Ruining His Business
  • PARTY’S OVER JOE: Republicans Crush Democrats in Local Elections
  • Joe Biden – Malicious, Incompetent, a Wannabe Left Wing Ideologue?
  • Jean-Pierre: Economy “Not Something that We Keep an Eye on Every Day”
  • Job Market Survival Advice for Graduates and for Those YOU Love
  • The Destructive Rise and Fall of BLM
  • What Would We Do without the Experts?

About Us

  • About Young Research
  • Archives
  • Contributors

Our Partners

  • Richard C. Young & Co.
  • Richardcyoung.com

Copyright © 2022 | Terms & Conditions

 

Loading Comments...
 

    loading Cancel
    Post was not sent - check your email addresses!
    Email check failed, please try again
    Sorry, your blog cannot share posts by email.