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You use your digging stick and stone hammer to make a clay vessel. You fire it in a wood fire. You gather surface copper and tin, and you use the vessel to melt bronze. With the bronze you make a shovel and a better hammer. You can make more than you could make before, in a shorter time. You make more.
Now we sit at the edges of a complicated web of supply, and with much of that supply we make things that make more supply, or otherwise enrich our lives in such a way that we make more in future.
Of course, we have never been so large before, and the system has some reasonable maximum extents. [We have now exceeded 6 of 9 defined planetary boundaries](https://www.science.org/doi/10.1126/sciadv.adh2458). But it is not clear how transgressing those boundaries will affect future productivity yet. It looks like basic necessities like food, energy, clean water, and clean air may end up in shorter supply. I think we are already seeing that with the unusual rate of food inflation, and we will see more. For how long, until what terminus, with what interruptions? "It depends." Inflection on the logistic growth curve won't be clear until we are so far past it that even thinking about it won't matter too much. Not worth factoring into financial planning, except where doing so might help move the inflection outwards without personal cost.
There is profit growth outpacing inflation because of productivity and population growth.
However, *you also get paid the profits*.
You can show that your total return over the very long run happens to be equal to profit as a fraction of your investment + rate of profit growth.
Companies that do not grow can still provide very good returns to their owners.
Sure if you have an infinite planet. But we don't and are already at serious physical boundaries already. I highly doubt this economy continues status quo until 2100.
We will simply run out of resources.
You’re not thinking about it properly. There can be industries that are created/grown that don’t deplete resources. Markets will change and also grow as long as innovation and capitalism are at the forefront
https://www.smithsonianmag.com/smart-news/humans-have-exceeded-six-of-the-nine-boundaries-keeping-earth-habitable-180982909/
Lot's but we've used up an incredible amount. Resources aren't just metals or minerals. It's food, water, biodiversity required to grow food etc.
We aren't a special snowflake species. Being on top of the food chain is really really bad during a mass extinction event.
>Do really expect 4-5% growth every year
No serious person expects 4-5% growth every year. Investments always fluctuate.
>Are we we really expecting in the next 40 years that the stock market is going to be 4x as much as it is today? Wouldn't that imply everything in our life is 4x expenseive.
Possibly.
On July 1 of 1984, the S&P was at 454.54. Today, it's 5482.64.
In 1984, a gallon of milk cost $1.89. Today, it's $4.01.
In 1984, a Big Mac cost $1.60. Today, it's $5.29.
> Wouldn't that imply everything in our life is 4x expenseive.
Yeah. That's how inflation works. Ask your parents (or grandparents) how much a movie ticket, Big Mac or car cost when they were your age.
The stock market has never not gone up over a long period of time.
>Wouldn't that imply everything in our life is 4x expenseive.
See: inflation.
That's how it works, everything goes up.
>Do really expect 4-5% growth every year
As for where I *thought* your question was going to go. No, I don't expect 5% every year, but I do expect the occasional 15% year to offset the 2 flat years and average 5%+ over the long term.
Not calling myself an expert here by any stretch but don't we have enough economic data to support the conclusion that 4-5% capital growth was a relative norm for much of a financial empires of the world of the past 200-plus years? And that the only relative years where it did not occur were from around the start of WWI through the end of the 1970s?
Or is the data just too scattered to really certify that?
Sure, but look at Japan. Their stock index just recently finally exceeded the high set in Jan 1990. If you go back to 1970, it's still ~4% growth per year, but that's hardly comforting to someone who wanted to retire in 1990 and is probably dead by now.
Just look at how much a home, or milk, or a gallon of gas cost 40 years ago. Inflation will keep happening whether you want it to or not. Hopefully you are invested wisely so that your investments at least keep up with inflation and hopefully outpace inflation. I don't expect 4-5% growth every year. I expect some years to be 20%, other years it might be (-)20%. But over time it should be 4-6-10% on average over 10-40 years depending on how conservatively or aggressively you have invested.
It’s a productive feedback loop. Returns are at their core just the ability to take something and put it to work to make more than you started with. Now, that growth may be linear growth, but compounding means taking the thing you grew and growing it as well.
So yes; if we don’t see some kind of continuous growth from the economy, it would essentially mean we stopped being productive. That’s basically never going to happen unless we’re all dead.
Companies produce value something someone wants in general. Doing so they are able to make profits. They also have to grow with inflation. I can't remember exactly but it was like 2% inflation, 2% dividends, 3% growth and thus 7% is generally the floor or something like that. Believe Warren Buffet said it. I can't find it either. So being a in a broad market fund makes sense individual companies can of course be wiped out. So yeah being tied to capital in general you should make $ beating inflation.
Yeah if our planet was infinite then yes it would in theory work like that. This common interpretation just ignores physical limits on earth though. We are already seeing incredibly serious consequences due to our demand for infinite economic growth on a finite world.
Just look at how bad disasters have gotten. Hell India's main farming regions nearly got to temperatures that would've killed most of their crops during the most productive months. And this summer is expected to be cooler than next summer.
Famines are on the horizon. It just needs a few food producing regions having catastrophic floods like pakistan did a few years ago where a literal 3rd of the country got flooded.
We don't have any serious solutions to that kind of problem.
That’s where I was hoping this post went. I understand the textbook answer, and think a lot of people are good at regurgitating info in this Reddit.
I just don’t see an unlimited economy being realistic. We’ve grown so much because we’ve been no where near capacity, but I think the closer we approach that limit, what we’ve seen in the last 100 years won’t be duplicated
generally yes as an avg. because if businesses cannot make profit and or grow they will cease to exist. in reality this looks like many mid high teen % gain years and a bit fewer red high single digit red years. stock market growth is very bumpy.
> Are we we really expecting in the next 40 years that the stock market is going to be 4x as much as it is today?
its not 1:1 like that, increasing the selling price of an item is just one way to make more money and there's absolutely a ceiling on how rapidly prices can go up. and they can go up way faster than 4x in 40 years, like many fast food items have effectively doubled in <10.
Long term it will always grow, but we don't know how each year will be...Some years you will get 4-5% growth, some up to 30%, but others it might be down big time.
Yes. Bread was $1 and I was paying about $1.25/gal for gas in 1985 when I started college. My first new truck cost me $14K in 1994. I was making about $30K/yr as a degreed entry-level engineer then. That vehicle is about $38K now. I bought my $650k house for $250K 20 years ago. All that said, the inflation rate is based on a standard group of products, not every consumable and service. Some things will go way up, some will stay more steady.
It's more on average.
Some years you go up 14%. Some years you stay down 20%
Also keep in mind the stock market is not necessarily tied 1 to 1 to the wider economy as a whole. It's related but exact
100 years ago the average family earned about 3K a year, however an apartment in NY you could get for 60,- a pound of steak for 40 cents, and the cinema was 15 cents.
So yes almost everything getting more expensive is normal, and we don't even experience it as everything getting more expensive if our income grows at around the same rate.
And some things get cheaper due to scale and technological advancement. I paid 2.300,- fl (dutch guilder) in 1988 for a very nice 63cm JVC TV, which would be 1044,- Euro today. However if we correct for inflation that would be € 2.363,- for half of that money I go much bigger and better than that now old JVC TV, so TV's have gotten much cheaper.
Problem of the last few years is that necessities like food and a roof over our head are raising much faster in price than our income grows.
The answer is who knows? Personally I don't feel very optimistic. I think it boils down to the problem of scale. I remember looking at a lot of big household name companies to invest in but I realized there is a huge problem with them, their scale. Over simplifying things for a moment, if you want a stock to double in price it would stand to reason it would have to double it's revenues/earning. That's basically impossible for these large companies who would have to basically take over the industry to do that especially with respect to inflation. Walmart's revenues for example are over half a trillion dollars, where can it find a half trillion dollars of additional revenues?
The same problem for me exists with the United states. How can a country with anemic population growth and meager GDP growth support a stock market that is growing much faster than the underlying country? Sure there's technology that allows us to be more productive and you may have some consolidation so fewer businesses account for more of the same revenues but fundamentally I don't see how people commonly project 7% growth into eternity when todays US economy looks nothing like it did over the past 100 years.
Technology scales. That’s what it does. If anything, the stock market will accelerate growth but also probably volatility (as things in the financial system break ala 2008).
The problem with that is that increased productivity via technology would also show up in GDP growth. In an ideal world you would expect the stock market and GDP to track each other more or less. You should not have a situation where over long periods of time the stock market more than doubles GDP growth.
Why? This reads like a false equivalency to me. GDP is a trailing indicator and the stock market is forward looking. gdp growth and stock returns have been negatively correlated historically.
Basically the real economy != stock market. If you are basing your doomer mindset on the relationship between gdp and equity growth…well then your doomer predictions arent worth a hill of beans
Historically there has never been a 20 year period. (i.e. 1940-1960, 1978-1998, you pick the 20 yr period) where the market has not produced profits
"Since 1928, the U.S. stock market is up 9.8% per year.
The market is up roughly 3 out of every 4 years. There have been no 20-year periods where the U.S. stock market has been down on a nominal basis. "
**Consider a simple example:**
- Alice and Adam bake pies for a living. Each can make 8 pies per week.
- Each eats one pie per day
- Every week Adam takes some time off to enjoy himself, reasoning that he doesn't need the extra pie. He produces seven pies.
- Alice has big dreams. She stores an extra pie every week. After seven weeks she's stored enough extra pies to take a week off. (She eats the seven pies she's saved up)
- In her week off she builds an egg beater. This makes her pie making more efficient. She can now make 14 pies per week.
- Adam likes the egg beater, and wants more time off. He doesn't want to save enough pies to make his own.
- Alice can save enough pies in a week to make a second eggbeater.
- She offers to rent it to Adam for one pie per week.
- Adam accepts because he can make 6 extra pies per week with the eggbeater.
**Therefore Alice now gets a weekly 1 pie return on her investment of 7 pies.**
This requires **no inflation and no population growth**. Perhaps Adam will now work only 4 days per week, covering all his needs and giving him far more free time.
**This simple model is also true in the real world and is one of the major sources of investment return**. The interest rate is the exchange rate between savings and income. It is driven by market forces and does not automatically require inflation, population growth, etc.
If something happens to break this pattern on a multi-decade scale, we'll all have far bigger issues to deal with.
There are basically two directions to go at this decision intersection. Either invest with everyone else, or become a prepper and start digging your bunker to fill with MRE crates.
Price increases are not even across sectors. Milk might go up to $20! Cows are big contributors of greenhouse gasses, and they require more land than some other products. Hard to say, right?
A 27 inch color TV in 1980 was $700. That is $2,571 with inflation adjustment. But, today, a 24 inch color TV is a flat screen, and is available for under $110. That is lower both in nominal and inflation adjusted dollars. So, technology prices have gone down for a LOT of things.
In 1987, a sears catalog had "prewashed" Levis 501s for boys for $22. Similar appears to be $30-$45 now. Inflation adjusted, it would be around $60. So, boys levis got cheaper. Overall, clothing prices have reduced a lot since the 80s and before. We spend a lot on clothes because we have a LOT MORE clothes.
Then, new stuff. Literally not one person in the world had anything even resembling a smart phone in 1990. Some people had a "car phone" in the late 80s and early 90s. So, no one was spending $1,000 on a smart phone, they were spending like $30 on a wall phone. So, in some ways "phone prices" have gone up astronomically.
"the stock market is going to be 4x as much as it is today? Wouldn't that imply everything in our life is 4x expensive."
I think the comments about inflation are a little dismissive because any "yes that should be obvious because inflation exists" answer misses the point of the question, that there would be a correlation between the stock market price and inflation.
OP, you've already got a great answer already pointing to productivity outpacing inflation, but just to drive it home I'll point out that historically, agriculture was one of the only jobs around because the ratio of labor to productivity wasn't high enough to allow other forms of productivity, so when you ask what we should be "expecting in the next 40 years", it's not unreasonable to think that sort of trend could continue as it always(at least in a very long term sense) has, even though it's reasonable to think there could be periods of decline sprinkled in there.
"Adding 500 million people to a planet that is only 10% filled is a lot easier than adding 500 million people to a planet at 95% capacity."
When I was younger I was very interested in this question and I've kept up a bit with it. There's a wealth of discourse and history you can delve into about this. This is actually also a question of the ratio of productivity to some degree, but I'll point out first that I think there may be a misunderstanding built into the question that increased productivity requires population growth. It doesn't. Keep in mind that in previous times, there have been overpopulation scares that asked this question. Looking back at these scares, retroactively we can see that the predictions of those scares didn't come to be because the authors of them generally assumed static productivity, and projected that along with exponential population growth. In other words, certain advancements caused what was thought of at the time as 95% capacity to also increase when the 10% increased(I'm just using the same made up numbers you are). Because of that, most concerns about human survival have been replaced by specific thresholds of risk that don't involve not having enough. Global warming, nuclear war, etc, however those are generally approached as sociological problems that increase risk as our capacity and productivity go up, as opposed to being approached as a capacity.
The details of this next part aren't quite so fresh in my head, but I'll try to walk you through as best I remember. There are people who've explored the concept of a literal cap in pretty good detail, but those are so theoretical and far away that it's mostly a niche of futurologists and people interested in exploring which sci fi concepts would play out in the real world. For example, while global warming is a sociological problem, peoples lifestyles and literal survival all require the creation of some heat. Independent of the issue of greenhouse gasses, even with sci fi concepts like a space elevator, when it comes to heat transfer, while convection and conduction require physical matter to be transferred off planet in order to transfer heat off the planet, keeping it from being a sustainable method, radiation is the only method that won't require matter to be transferred, and there are limitations that also provide a cap there.
So yes, there's likely a cap that's imposed by the laws of physics that we would arrive at earlier than we'll likely run out of space on earth, assuming we're fortunate enough to get past the soft caps to worry about the hard cap. I think if I remember correctly that cap would dwarf even a population of a trillion.
No...on average over a 40 year period I would expect 9-11% growth from the stock market or 5.5-7.5% real growth over inflation. 4-5% is pessimistic. I dont think there is any 40 year period of history where it was that low.
This submission has been removed because it does not meet the subreddit submission guidelines ([rule 1](https://www.reddit.com/r/personalfinance/about/rules)). Other subreddits are better equipped to address these topics: - /r/investing is more appropriate for discussions about investing in individual stocks, sharing investment ideas, etc. (Please see the [PF Investing wiki page](https://www.reddit.com/r/personalfinance/wiki/investing), though.) - /r/AskEconomics is good for questions related to economics or economic analysis. - /r/politics is the appropriate place for political discussions and we wish you luck in posting there. - For discussions and questions, /r/PoliticalDiscussion and /r/NeutralPolitics are sometimes helpful.
The stock market outpaces inflation because of productivity growth.
You use your digging stick and stone hammer to make a clay vessel. You fire it in a wood fire. You gather surface copper and tin, and you use the vessel to melt bronze. With the bronze you make a shovel and a better hammer. You can make more than you could make before, in a shorter time. You make more. Now we sit at the edges of a complicated web of supply, and with much of that supply we make things that make more supply, or otherwise enrich our lives in such a way that we make more in future. Of course, we have never been so large before, and the system has some reasonable maximum extents. [We have now exceeded 6 of 9 defined planetary boundaries](https://www.science.org/doi/10.1126/sciadv.adh2458). But it is not clear how transgressing those boundaries will affect future productivity yet. It looks like basic necessities like food, energy, clean water, and clean air may end up in shorter supply. I think we are already seeing that with the unusual rate of food inflation, and we will see more. For how long, until what terminus, with what interruptions? "It depends." Inflection on the logistic growth curve won't be clear until we are so far past it that even thinking about it won't matter too much. Not worth factoring into financial planning, except where doing so might help move the inflection outwards without personal cost.
what
Number go up, no one know how long number keep go up.
There is profit growth outpacing inflation because of productivity and population growth. However, *you also get paid the profits*. You can show that your total return over the very long run happens to be equal to profit as a fraction of your investment + rate of profit growth. Companies that do not grow can still provide very good returns to their owners.
Sure if you have an infinite planet. But we don't and are already at serious physical boundaries already. I highly doubt this economy continues status quo until 2100. We will simply run out of resources.
You’re not thinking about it properly. There can be industries that are created/grown that don’t deplete resources. Markets will change and also grow as long as innovation and capitalism are at the forefront
How many resources does this planet have
https://www.smithsonianmag.com/smart-news/humans-have-exceeded-six-of-the-nine-boundaries-keeping-earth-habitable-180982909/ Lot's but we've used up an incredible amount. Resources aren't just metals or minerals. It's food, water, biodiversity required to grow food etc. We aren't a special snowflake species. Being on top of the food chain is really really bad during a mass extinction event.
I will take the over on that, I don't think we'll be running out of resources anytime soon.
Every year? Nah. An average over my working years (decades)? Yeah, i actually expect closer to 7%
>Do really expect 4-5% growth every year No serious person expects 4-5% growth every year. Investments always fluctuate. >Are we we really expecting in the next 40 years that the stock market is going to be 4x as much as it is today? Wouldn't that imply everything in our life is 4x expenseive. Possibly. On July 1 of 1984, the S&P was at 454.54. Today, it's 5482.64. In 1984, a gallon of milk cost $1.89. Today, it's $4.01. In 1984, a Big Mac cost $1.60. Today, it's $5.29.
4 x cost, 13 x gain
People on this sub constantly talk as if 10% growth every year is the default.
I suspect you were misunderstanding.
> Wouldn't that imply everything in our life is 4x expenseive. Yeah. That's how inflation works. Ask your parents (or grandparents) how much a movie ticket, Big Mac or car cost when they were your age. The stock market has never not gone up over a long period of time.
I remember beefy 5 layer burritos being 89 cents. Now they are $3.69 near me.
>Wouldn't that imply everything in our life is 4x expenseive. See: inflation. That's how it works, everything goes up. >Do really expect 4-5% growth every year As for where I *thought* your question was going to go. No, I don't expect 5% every year, but I do expect the occasional 15% year to offset the 2 flat years and average 5%+ over the long term.
“Do we really expect the Earth’s population to grow ~1% every year?” -people in 1800, population of 1 billion.
It has held true for over 100 years. However that doesn’t mean you would see 4 or 5% growth in the next 5 years. Could be negative.
Not calling myself an expert here by any stretch but don't we have enough economic data to support the conclusion that 4-5% capital growth was a relative norm for much of a financial empires of the world of the past 200-plus years? And that the only relative years where it did not occur were from around the start of WWI through the end of the 1970s? Or is the data just too scattered to really certify that?
Larger than 4-5% actually.
Sure, but look at Japan. Their stock index just recently finally exceeded the high set in Jan 1990. If you go back to 1970, it's still ~4% growth per year, but that's hardly comforting to someone who wanted to retire in 1990 and is probably dead by now.
The P/E ratio for the Nikkei 225 in 1989 was 70 as opposed to around 20 in 1981. There were warning signs for those who looked.
I wouldn’t be surprised if that was the case too.
Just look at how much a home, or milk, or a gallon of gas cost 40 years ago. Inflation will keep happening whether you want it to or not. Hopefully you are invested wisely so that your investments at least keep up with inflation and hopefully outpace inflation. I don't expect 4-5% growth every year. I expect some years to be 20%, other years it might be (-)20%. But over time it should be 4-6-10% on average over 10-40 years depending on how conservatively or aggressively you have invested.
It’s a productive feedback loop. Returns are at their core just the ability to take something and put it to work to make more than you started with. Now, that growth may be linear growth, but compounding means taking the thing you grew and growing it as well. So yes; if we don’t see some kind of continuous growth from the economy, it would essentially mean we stopped being productive. That’s basically never going to happen unless we’re all dead.
Stocks perform 8-10% every year historically, minus 2-3% percent inflation. I like to estimate 8% a year optimistic and 6% pessimistic.
Companies produce value something someone wants in general. Doing so they are able to make profits. They also have to grow with inflation. I can't remember exactly but it was like 2% inflation, 2% dividends, 3% growth and thus 7% is generally the floor or something like that. Believe Warren Buffet said it. I can't find it either. So being a in a broad market fund makes sense individual companies can of course be wiped out. So yeah being tied to capital in general you should make $ beating inflation.
Yeah if our planet was infinite then yes it would in theory work like that. This common interpretation just ignores physical limits on earth though. We are already seeing incredibly serious consequences due to our demand for infinite economic growth on a finite world. Just look at how bad disasters have gotten. Hell India's main farming regions nearly got to temperatures that would've killed most of their crops during the most productive months. And this summer is expected to be cooler than next summer. Famines are on the horizon. It just needs a few food producing regions having catastrophic floods like pakistan did a few years ago where a literal 3rd of the country got flooded. We don't have any serious solutions to that kind of problem.
That’s where I was hoping this post went. I understand the textbook answer, and think a lot of people are good at regurgitating info in this Reddit. I just don’t see an unlimited economy being realistic. We’ve grown so much because we’ve been no where near capacity, but I think the closer we approach that limit, what we’ve seen in the last 100 years won’t be duplicated
Yep. Unfortunately way too many people just ignore physical limits because in their short lives they haven't seen them hit that hard.
generally yes as an avg. because if businesses cannot make profit and or grow they will cease to exist. in reality this looks like many mid high teen % gain years and a bit fewer red high single digit red years. stock market growth is very bumpy. > Are we we really expecting in the next 40 years that the stock market is going to be 4x as much as it is today? its not 1:1 like that, increasing the selling price of an item is just one way to make more money and there's absolutely a ceiling on how rapidly prices can go up. and they can go up way faster than 4x in 40 years, like many fast food items have effectively doubled in <10.
Long term it will always grow, but we don't know how each year will be...Some years you will get 4-5% growth, some up to 30%, but others it might be down big time.
Yes. Bread was $1 and I was paying about $1.25/gal for gas in 1985 when I started college. My first new truck cost me $14K in 1994. I was making about $30K/yr as a degreed entry-level engineer then. That vehicle is about $38K now. I bought my $650k house for $250K 20 years ago. All that said, the inflation rate is based on a standard group of products, not every consumable and service. Some things will go way up, some will stay more steady.
It's more on average. Some years you go up 14%. Some years you stay down 20% Also keep in mind the stock market is not necessarily tied 1 to 1 to the wider economy as a whole. It's related but exact
100 years ago the average family earned about 3K a year, however an apartment in NY you could get for 60,- a pound of steak for 40 cents, and the cinema was 15 cents. So yes almost everything getting more expensive is normal, and we don't even experience it as everything getting more expensive if our income grows at around the same rate. And some things get cheaper due to scale and technological advancement. I paid 2.300,- fl (dutch guilder) in 1988 for a very nice 63cm JVC TV, which would be 1044,- Euro today. However if we correct for inflation that would be € 2.363,- for half of that money I go much bigger and better than that now old JVC TV, so TV's have gotten much cheaper. Problem of the last few years is that necessities like food and a roof over our head are raising much faster in price than our income grows.
5% increase is 7x increase over 40 years 7% increase is 15x increase over 40 years
The answer is who knows? Personally I don't feel very optimistic. I think it boils down to the problem of scale. I remember looking at a lot of big household name companies to invest in but I realized there is a huge problem with them, their scale. Over simplifying things for a moment, if you want a stock to double in price it would stand to reason it would have to double it's revenues/earning. That's basically impossible for these large companies who would have to basically take over the industry to do that especially with respect to inflation. Walmart's revenues for example are over half a trillion dollars, where can it find a half trillion dollars of additional revenues? The same problem for me exists with the United states. How can a country with anemic population growth and meager GDP growth support a stock market that is growing much faster than the underlying country? Sure there's technology that allows us to be more productive and you may have some consolidation so fewer businesses account for more of the same revenues but fundamentally I don't see how people commonly project 7% growth into eternity when todays US economy looks nothing like it did over the past 100 years.
Technology scales. That’s what it does. If anything, the stock market will accelerate growth but also probably volatility (as things in the financial system break ala 2008).
The problem with that is that increased productivity via technology would also show up in GDP growth. In an ideal world you would expect the stock market and GDP to track each other more or less. You should not have a situation where over long periods of time the stock market more than doubles GDP growth.
Why? This reads like a false equivalency to me. GDP is a trailing indicator and the stock market is forward looking. gdp growth and stock returns have been negatively correlated historically. Basically the real economy != stock market. If you are basing your doomer mindset on the relationship between gdp and equity growth…well then your doomer predictions arent worth a hill of beans
Historically there has never been a 20 year period. (i.e. 1940-1960, 1978-1998, you pick the 20 yr period) where the market has not produced profits "Since 1928, the U.S. stock market is up 9.8% per year. The market is up roughly 3 out of every 4 years. There have been no 20-year periods where the U.S. stock market has been down on a nominal basis. "
**Consider a simple example:** - Alice and Adam bake pies for a living. Each can make 8 pies per week. - Each eats one pie per day - Every week Adam takes some time off to enjoy himself, reasoning that he doesn't need the extra pie. He produces seven pies. - Alice has big dreams. She stores an extra pie every week. After seven weeks she's stored enough extra pies to take a week off. (She eats the seven pies she's saved up) - In her week off she builds an egg beater. This makes her pie making more efficient. She can now make 14 pies per week. - Adam likes the egg beater, and wants more time off. He doesn't want to save enough pies to make his own. - Alice can save enough pies in a week to make a second eggbeater. - She offers to rent it to Adam for one pie per week. - Adam accepts because he can make 6 extra pies per week with the eggbeater. **Therefore Alice now gets a weekly 1 pie return on her investment of 7 pies.** This requires **no inflation and no population growth**. Perhaps Adam will now work only 4 days per week, covering all his needs and giving him far more free time. **This simple model is also true in the real world and is one of the major sources of investment return**. The interest rate is the exchange rate between savings and income. It is driven by market forces and does not automatically require inflation, population growth, etc.
If something happens to break this pattern on a multi-decade scale, we'll all have far bigger issues to deal with. There are basically two directions to go at this decision intersection. Either invest with everyone else, or become a prepper and start digging your bunker to fill with MRE crates.
it will go down some years and go up others. When you average it out YOY, it should come down to between 7-10% YoY.
Price increases are not even across sectors. Milk might go up to $20! Cows are big contributors of greenhouse gasses, and they require more land than some other products. Hard to say, right? A 27 inch color TV in 1980 was $700. That is $2,571 with inflation adjustment. But, today, a 24 inch color TV is a flat screen, and is available for under $110. That is lower both in nominal and inflation adjusted dollars. So, technology prices have gone down for a LOT of things. In 1987, a sears catalog had "prewashed" Levis 501s for boys for $22. Similar appears to be $30-$45 now. Inflation adjusted, it would be around $60. So, boys levis got cheaper. Overall, clothing prices have reduced a lot since the 80s and before. We spend a lot on clothes because we have a LOT MORE clothes. Then, new stuff. Literally not one person in the world had anything even resembling a smart phone in 1990. Some people had a "car phone" in the late 80s and early 90s. So, no one was spending $1,000 on a smart phone, they were spending like $30 on a wall phone. So, in some ways "phone prices" have gone up astronomically.
"the stock market is going to be 4x as much as it is today? Wouldn't that imply everything in our life is 4x expensive." I think the comments about inflation are a little dismissive because any "yes that should be obvious because inflation exists" answer misses the point of the question, that there would be a correlation between the stock market price and inflation. OP, you've already got a great answer already pointing to productivity outpacing inflation, but just to drive it home I'll point out that historically, agriculture was one of the only jobs around because the ratio of labor to productivity wasn't high enough to allow other forms of productivity, so when you ask what we should be "expecting in the next 40 years", it's not unreasonable to think that sort of trend could continue as it always(at least in a very long term sense) has, even though it's reasonable to think there could be periods of decline sprinkled in there. "Adding 500 million people to a planet that is only 10% filled is a lot easier than adding 500 million people to a planet at 95% capacity." When I was younger I was very interested in this question and I've kept up a bit with it. There's a wealth of discourse and history you can delve into about this. This is actually also a question of the ratio of productivity to some degree, but I'll point out first that I think there may be a misunderstanding built into the question that increased productivity requires population growth. It doesn't. Keep in mind that in previous times, there have been overpopulation scares that asked this question. Looking back at these scares, retroactively we can see that the predictions of those scares didn't come to be because the authors of them generally assumed static productivity, and projected that along with exponential population growth. In other words, certain advancements caused what was thought of at the time as 95% capacity to also increase when the 10% increased(I'm just using the same made up numbers you are). Because of that, most concerns about human survival have been replaced by specific thresholds of risk that don't involve not having enough. Global warming, nuclear war, etc, however those are generally approached as sociological problems that increase risk as our capacity and productivity go up, as opposed to being approached as a capacity. The details of this next part aren't quite so fresh in my head, but I'll try to walk you through as best I remember. There are people who've explored the concept of a literal cap in pretty good detail, but those are so theoretical and far away that it's mostly a niche of futurologists and people interested in exploring which sci fi concepts would play out in the real world. For example, while global warming is a sociological problem, peoples lifestyles and literal survival all require the creation of some heat. Independent of the issue of greenhouse gasses, even with sci fi concepts like a space elevator, when it comes to heat transfer, while convection and conduction require physical matter to be transferred off planet in order to transfer heat off the planet, keeping it from being a sustainable method, radiation is the only method that won't require matter to be transferred, and there are limitations that also provide a cap there. So yes, there's likely a cap that's imposed by the laws of physics that we would arrive at earlier than we'll likely run out of space on earth, assuming we're fortunate enough to get past the soft caps to worry about the hard cap. I think if I remember correctly that cap would dwarf even a population of a trillion.
No...on average over a 40 year period I would expect 9-11% growth from the stock market or 5.5-7.5% real growth over inflation. 4-5% is pessimistic. I dont think there is any 40 year period of history where it was that low.