Krugman says: "In the long run, profits grow at
the same rate as the economy. So to get that 6.5 percent rate of return, stock prices would have to keep rising faster than profits, decade after decade."
It is surely true that stocks can not grow faster than the economy over the long term; since stocks are an asset class hermetically sealed within the economy in the first place.
But that's not all of it;
We are just coming off the world's greatest experiment in Bubblenomics. Not since 1720 has a Central Bank run the economy "as if" only asset bubbles mattered! And the fall out from that mistake is coming at us everyday now, but at a "measured pace."
Second, much of the "known record" on stock performance was taken during the "American Century" Essentially when American Industry "ruled the world."
THAT'S OVER NOW.....
Perhaps because of Bubblenomics. Or, perhaps free trade. Perhaps incompetent government, and huge deficits.
THE POINT IS THAT AMERICA IN THE 21ST CENTURY IS NOT THE SAME AS AMERICA IN THE 20TH CENTURY.
And, our performance will be different..... The 20th Century was a Golden Age for American Business.
Also, Europe self-destructed TWICE to the benefit of American growth!
New Inventions were popularized for the American middle class consumer. Cars, washing machines, telephones, radio, television etc....and this boom in invention is perhaps not reproduceable.
And, much of the old world was still stuck with their old aristocracies in the 20th Century....and their notions of the leisure class.
Well the Old World is catching up.....FAST!
Japan, China and India are making their claims in the 21st Century......
Further, the huge DIFFUSION OF TECHNOLOGY has changed the dynamics of the world economy greatly in recent years.
True, economics is not a zero sum game;
But it is still very Darwinian....and not everyone can win.
