February 13, 2008

The US Economy Since 1947

Larry Kudlow, host of Kudlow and Company on CNBC, says the following on his blog, Kudlow's Money Politics, about the long term prosperity of the US economy, as shown on the above graph:

Take a good look at those numbers. Now, even if I assume that we are headed into a recession, over the last 60 years, post WWII, real GDP has increased a whopping $10 trillion dollars. That's 634 percent. That comes to 3.4 percent growth a year after inflation. And that covers ten recessions.

Now look at the stock market. The S&P 500 percentage return has been nothing short of incredible. Almost 87,000 percent. That comes to 12 percent a year, or 9 percent after inflation.

Look, we’ve had 10 recessions between 1947 & 2007. The average length is ten months. The last two were eight months. But because of our economic freedom (particularly in the last 25 years since Ronald Reagan helped transform the economy) none of this has impeded our prosperity. None of this has stopped output or employment. None of this has stopped the robust U.S. stock market expansion.

Our Goldilocks free market economy is not recession-free. We do have corrections in business cycles. I don’t deny that. But look at those numbers again. They are spectacular. This could very well be an extraordinary time to buy stocks for the long run.

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