"Consider that long-term
investment performance is constrained by the same types of factors that
constrain economic growth. For example, long-term earnings gains are linked to
productivity gains, which are linked to technology and innovation. Therefore,
earnings don’t outgrow the economy on a permanent basis, and nor do stock
prices. Unusually large returns in any given year are counterbalanced by poor
returns in some other year."
"It seems to me that trade-offs between short-term performance and long-term stability are largely ignored these days. At one time, politicians were best known for short-termism but central bankers were more balanced. Just look at former Fed Chairman Paul Volcker, who traded off a deep recession in 1981-82 for long-term benefits that lasted several decades.
Fast forward to today, and the policy approach is completely different. As trade-offs go, we often hear about inflation and unemployment, which is understandable considering the Fed’s dual mandate. But policies are clearly linked to the present and immediate future. Today’s core inflation rate is compared to a 2% target, while today’s unemployment rate is judged against a recently established 6.5% threshold."
"It seems to me that trade-offs between short-term performance and long-term stability are largely ignored these days. At one time, politicians were best known for short-termism but central bankers were more balanced. Just look at former Fed Chairman Paul Volcker, who traded off a deep recession in 1981-82 for long-term benefits that lasted several decades.
Fast forward to today, and the policy approach is completely different. As trade-offs go, we often hear about inflation and unemployment, which is understandable considering the Fed’s dual mandate. But policies are clearly linked to the present and immediate future. Today’s core inflation rate is compared to a 2% target, while today’s unemployment rate is judged against a recently established 6.5% threshold."
