Possibly Two more Years to Complete Deleveraging

A. Gary Shilling

Slow economic growth will persist until excess financing is worked out. But at the rate that balance sheets are being normalized it may take longer than two years (from now) to complete the correction. Hence our 2 percent real GDP forecast for 2016 and 2017.  

After the age of Deleveraging is complete, we believe that today’s new technologies will drive rapid GDP growth of 3.5 percent to 4.0 percent.

DYI Comments:  My thoughts are not as optimistic as the deleveraging of private sector debt will most likely require another 5 years (possibly as long as 7 years) to run its complete course.  What is slowing down the deleveraging is the barbel of debt being created from student loans and ever expanding health care costs.  Both of these are expanding debt at a wild rate hampering the improved stats in the other financial areas.  However, I do agree as these new technologies move more fully through our society growth will pick up.  Also as Boomers at the end of this decade begin to retire in statistically significant numbers the true labor numbers will improve (labor participation rate) so much so the 2020's will be billed as the roaring 20's (at least for labor) as the U.S. move into LABOR SHORTAGE.  The 2020's will be marked as a time of high taxes, high inflation, and a labor shortage. Once Boomers begin to pass away, again in statistically significant numbers, the 2030's inflation will cool and the labor shortage as well.

DYI