tag:blogger.com,1999:blog-11719208.post2338792640853059532..comments2023-11-05T04:36:14.223-08:00Comments on The Mess That Greenspan Made: Fun with Multi-Decade ChartsTimhttp://www.blogger.com/profile/16530974968126497397noreply@blogger.comBlogger7125tag:blogger.com,1999:blog-11719208.post-11688746845891132462007-04-04T15:55:00.000-07:002007-04-04T15:55:00.000-07:00You've hit on an interesting point about compound ...You've hit on an interesting point about compound growth. I think I draw a somewhat different conclusion than you: I think that, more often than not, continuing compound growth is ominous.<BR/><BR/>I am beginning to suspect that in the financial sphere, anything that compounds for a long time at rates grater than 3% <I>is</I> likely to lead to a calamity. A rate of growth of 2-2.5% seems to somehow be more "natural". But even that may only apply to historically brief periods (for example, population growth of just 2.5% a year globally would still do us in within a few tens or hundreds of years).<BR/><BR/>Soddy (and perhaps others) have pointed out that "permanent" returns at even "conservative" rates, like 6%, are an inherent paradox: if that growth rate was made concrete by converting it into ounces of gold, in a few hundred years, one would go from a ball of gold you could hold in your hand to one greater than the diameter of the earth. This is simply a statement about the permanence of such benefit.<BR/><BR/>I suspect it is indeed possible for wealth, in general, to grow at a reasonable compounded rate, forever. But in doing so, the method will likely continue to change entirely, and the benefit migrate from nation to nation (or between other sorts of groups). And the net rate might be quite "low"... 1-2%, maybe 2.5%, annually.<BR/><BR/>What seems to be "infinitely" compounded growth often turns out eventually to be an S-curve; or something that gets blown off periodically, leaving not much more than 1 or 2% (like the real growth in the Dow).Aaron Krownehttps://www.blogger.com/profile/10625220296615695247noreply@blogger.comtag:blogger.com,1999:blog-11719208.post-81445505717433795232007-04-04T09:35:00.000-07:002007-04-04T09:35:00.000-07:00"The lesson here?Be careful with those multi-decad..."The lesson here?<BR/><BR/>Be careful with those multi-decade charts."<BR/><BR/>I assume you are talking about Schiller's "Housing Bubble" chart going back to 1849 Amsterdam which "proves" the coming nuclear winter?<BR/><BR/>A little late for dinner, aren't you?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-11719208.post-4122046090033840982007-04-03T13:38:00.000-07:002007-04-03T13:38:00.000-07:00Let me try that wiki link again… LinkLet me try that wiki link again… <BR/><A HREF="http://en.wikipedia.org/wiki/Image:Inflaci%C3%B3_utan_1946.jpg" REL="nofollow">Link</A>Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-11719208.post-44178663757917973422007-04-03T13:13:00.000-07:002007-04-03T13:13:00.000-07:00I remember back in the sixties and seventies there...I remember back in the sixties and seventies there used to be a CPI index of some sort. Eventually, the index got so high the base year was changed. Then later the index went away altogher. Inflation sounds much better when it "only" rises .3 or .4% month after month.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-11719208.post-40762767760473356512007-04-03T13:01:00.000-07:002007-04-03T13:01:00.000-07:00Anon 12:01, I'm getting 8.5% on six month CDs in H...Anon 12:01, I'm getting 8.5% on six month CDs in Hungary, it's only going to take me 58 to get there! Probably by then it's going to look like this: http://en.wikipedia.org/wiki/Image:Inflaci%C3%B3_utan_1946.jpg Tim, thanks for the great charts!Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-11719208.post-25359112207210554772007-04-03T12:01:00.000-07:002007-04-03T12:01:00.000-07:00I am getting 8.05% in my New Zealand CD, so looks ...I am getting 8.05% in my New Zealand CD, so looks like I just need to wait another 65 years and I will be rich!Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-11719208.post-36372052038747183922007-04-03T11:53:00.000-07:002007-04-03T11:53:00.000-07:00Hey, thanks for the clarification. I always though...Hey, thanks for the clarification. I always thought there was something wrong with those charts that go back a hundred years.Anonymousnoreply@blogger.com