Total Return and GDP Growth

[John K. Taber]

Dean Baker while he was still at EPI released a paper, Saving
Social Security in Three Steps, which figures future stock
market *total* returns as an average annual 3.5%. The historical 
rate is 7% annually. Baker used the projected GDP growth rate 
published in the Trustees's Report.

Depending when you begin averaging GDP growth, from the figures of
the actuaries at the Social Security Administration, we get an
average GDP growth of about 1.5%. Actually, their GDP growth is a 
shrinking figure, ending up at 1.2% in 2075.

Anyhow, if total return historically is roughly twice GDP, Seth
Ackerman's take sounds about right to me. It is total return we
are talking about.

As to why stock market total returns are twice GDP growth, I pass.

--
Homines id quod volunt credunt.