#139: Growing Backwards

micksonmatch
September 05, 2024

S2N Spotlight

The Australian Bureau of Statistics released the latest GDP numbers for the June quarter yesterday. Real GDP grew by an anaemic 0.2%, but a more practical picture is the per capita GDP, which went backwards by -0.40%. The headline number doesn’t take population growth into account. We had a big boost in population growth over the last few years.

The chart below helps illustrate how the per capita growth has been diverging and is now “growing” backwards.

Last night I went to a small gathering at a neighbour; they wanted to introduce us to someone running in the up coming local elections. Am I a bad guy? I have zero interest in local and state politics, but I went. Everyone was so into it, and I was wondering how I could ever get the 90 minutes I had just wasted back.

A doctor in public health made an insightful comment. He said the single most spoken-about subject he encounters on a daily basis is the cost of living crisis people are experiencing. This is the consequence of excessive monetary stimulus and reckless government spending. We must remember that the government spends our money, and we should therefore hold them to account as there is no such thing as a free lunch.

Perhaps this next chart released from data released in the US a few days ago will help make the point. I really need to start adding my data sources to my plots. Personal savings shot to the moon in the US with all the government stimulus. This helped fund the mother of all consumption splurges, delaying a recession and inflated the stock market. People have now spent their savings and some. I don’t believe the money was spent on productive things; I think people just consumed with wild abandon after being so restricted during the pandemic. Kind of like, heck I survived a pandemic, we nearly died – yolo. As you can see, we are pretty close to an all-time low in savings. The government is already spending way more than it has, thus increasing the deficit. Personal savings are depleted. People are asset rich and will need to sell some of those assets to fund their lifestyle. Hard or soft landing, cabin crew prepare the cabin for landing.

S2N Observations

The great inversion conversion. After the longest yield curve inversion in history, we touched above 0 a few days ago. Historically, this has been a bad time for markets.