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Tuesday, September 30, 2003

Question Time!

I'm interested in fomenting debate around tough questions that don't have an absolutely right or wrong answer. In the process of all of us writing our thoughts, maybe we'll learn something.

I've got two question areas I'm interested in exploring. Here's the first one:

Is economic growth a panacea? What problems are left unaddressed or are exacerbated by growth? Is it possible that growth is nearly a panacea for a developing economy, but that a mature economy might find a different driver to be more appropriate? If so, what would the measure be? Can investments in stock markets in a no- or low-growth environment possibly pay off over the long term? What policies or market mechanisms would need to change for the citizenry to prosper in a no-growth economy? Since U.S. immigration rates are still high, this probably won't be an issue for us for several decades. But, by 2050 or so, the population of the world is expected to level off - then actually fall. Lacking a net increase in consumers, growth then becomes dependent on individuals consuming more and more value (though not necessarily more weight in goods). But, is this sustainable? I'm beginning to wonder if people may not be insatiable when it comes to things. I, for one, have no significant unmet material needs any more. I'm not saving for more goods; I'm only saving now so I don't have to work. When I retire I'll consume more free time, and even fewer goods, and will be a net drain on growth.

If this question doesn't interest anyone, that's OK. Just ignore it. I'll ask another one that may get more traction.

By the way, for those who haven't read last week's Economist special section on the global economy, I recommend you check it out. The obvious message is that there are major structural problems, and that the likely outcome is a dramatic fall in the U.S. dollar because there are no other large economies poised to bail us out with high demand for our products. Shortly, I'm planning to move substantial chunks of my 401(k) to international funds. An economic cataclysm is likely to negatively affect them as well, but at least they'll be buffered in U.S. dollar terms due to relative appreciation of foreign currencies. Howie, I'd appreciate any thoughts you might have on this issue.

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