[RT] Re: GEN:Question for the Economists

[Daniel Goncharoff <Daniel.Goncharoff@xxxxxxxxxxxxxxxxxxxx>]

Gitanshu

The simple answer to your question:

"What's wrong with the US economy growing at 7%? Why would one want to
trade an economy that grows 7% for an economy that grows 4%?"

is, nothing. And, you wouldn't.

There is a more complicated answer, however.

I t depends on whether you believe the 7% growth is sustainable, and not
a temporary pnenomenon.

Consider these alternatives:

a) The economy grows by 7% in the first Q, and then by 0% in Q2;
b) The economy grows by 3.5% in both Q1 and Q2.

(I am aware of the 'power of compound interest', which would make
overall growth slightly higher in case b; please ignore it for the
purposes of this argument.)

I would prefer case b to case a. A less volatile economy is better for
business and will create even higher growth in the future.

So if you believe 7% growth is not sustainable, and destined to be
reversed by less growth in the future, you could rationally favor lower
growth now, expecting it to be followed by higher growth later.

Regards
DanG