The Very Long View

The article is examining the long run of the economy compared to the short run. Strikingly, the recent year-end trough in this inflation-adjusted index, in 2008, was only fractionally higher than the peak in 1968. Investors had made no capital gains in real terms over 40 years. Although, they had enjoyed the benefits of a dividend income throughout this period. But this long drought was far from unique. When markets are booming, however, commentators tend to look back at the performance of stocks and extrapolate an even rosier future. The obvious parallel is with house prices. Analysts were convinced that American house prices might suffer regional busts but would not fall at the national level. The idea of housing as a one-way bet fuelled the boom in subprime lending and pushed prices up to a peak from which they could only fall. Robert Shiller of Yale University has pointed out that, in real terms, an index of American house prices rose from 100 in 1890 to 110 by the end of the 20th century. By the end of 2006, at the top of the housing boom, the index had reached 199. The key “saving age” is the cohort of 35-54 year-olds. As they prepare for retirement. This article shows that we may be in trouble now but hopefully in the very long run we will be out of this recession, and see better days.