While expectations of faster earnings growth may well be contributing to elevated P E levels, the current situation is complicated, to say the least. What is certain is that expectations of high earnings growth would have a more durable positive effect on P E levels than the suppression of the equity risk premium.

The answer depends on two key variables the discount rate and future earnings growth. A lower discount rate and or a higher rate of expected earnings growth would justify higher equity valuations.

In the long run, it is reasonable to expect that revenue growth would be broadly consistent with economic growth and, as it stands, there is little acceleration on this front. Earnings can grow faster than revenues for a prolonged (though not indefinite) period, if companies cut costs or reduce investment a trend that would, over time, lower depreciation charges.

The eurozone is now running even larger ones, with swings in southern Europe augmenting Germany s longstanding surpluses. Indeed, countries from Singapore to Russia are running large surpluses.

As developing countries increased their labor intensive production and exports, their current account surpluses rose by almost 3.6 percentage points, on average, between 1989 1993 and 2002 2006. China s current account surplus increased by almost 11 percentage points over the same period, India s by 2.5 percentage points, and Russia s by seven percentage points.

That said, some trends may be having the opposite effect on expectations for earnings growth. More than two fifths of the S amp P 500 s earnings come from external markets, some of which, like Europe and Japan, are barely growing, while others, like China, are slowing.

Fifth, weak profitability, owing to high debts and default risk, low economic and thus revenue growth, and persistent deflationary pressure on companies margins, will continue to constrain firms willingness to produce, hire workers, and invest.

China isn t the only success story. Other big winners in terms of real per capita GDP between 2000 and 2004 are Lithuania (up 48 ), Romania (up 41 ), Estonia (up 40 ), Chile (up 33 ), Hungary (up 32 ), Greece (up 31 ), New Zealand (up 28 ), Australia (up 25 ), Korea (up 23 ), Ireland (up 23 ), South Africa (up 23 ), and Nigeria (up 22 ).

This endogenous response to rapid productivity growth was a key factor contributing to the savings glut. Old development verities that savings drive growth had to be re assessed, because, to some extent, emerging market growth drove savings.

Recent growth performance

Interest Rates

Equity markets have performed well globally in an environment of falling interest rates, low inflation and healthy growth in corporate profits.

The Fed and others were again overly optimistic about the extent to which these policies would boost GDP growth. Despite the fall in long term interest rates, house prices reached bottom only in 2012, and the stock market did not rise faster than corporate earnings until 2013.

The growth rate for 1991 was barely 2 per cent, compared with 4.3 per cent in 1990 and the average of 4.6 per cent achieved in 1986 1990.

The appreciation of the dollar exacerbates the situation for US markets, because it creates headwinds for exporters and causes companies foreign earnings, reported in dollars, to decline. And a slowdown in productivity growth, together with excessive leverage and persistent public sector underinvestment, may be undermining medium term potential economic growth.

At the same time, fiscal adjustment remains essential to Italy s short and long term stability. According to the International Monetary Fund, the budget deficit is declining, and the primary surplus (net revenues minus interest payments) is growing.

The economy was projected to have double digit growth in 2004 and the Government was expecting a recurrent surplus of EC 24 million for 2004, compared to EC 3 million in 2003.

But the longer term social impact is a reduction in population growth.

Resource growth in the biennium

With significant elements of the global economy and external demand facing headwinds, China s acceptance (so far) of a growth slowdown, while its new growth engines kick in, is a good sign, in my view. It suggests that policymakers are playing for longer run sustainable growth and have become warier of policies that, if used persistently, amount to a defective, unsustainable growth model.

Industrial growth during the same period had increased at a rate of 10.2 per cent.

Indeed, why not create European Infrastructure Bonds, backed by revenues generated by the investments or tax income from the countries that emit EIBs? This would not only spur jobs and long term growth it would also stem the rise in Europe s external surplus.

The Syrian economy and growth

Third, global imbalances led to cheap money. Long term current account surpluses in some countries (China, other rapidly growing Asian economies, and Gulf oil producers) permitted the long term financing of deficits in others (the United Kingdom, Australia, Spain, Ireland, and, above all, the US).

In case surplus reserves are used for increasing capital, making up losses or distributing dividends, it is required to give the related resolution or basis.

Slow Growth for US Interest Rates

D. Policies for growth

They have grown dynamically, at a rate of nearly 12 per cent per annum during the period 1985 1995.

Compared to countries with very slow growth rates, countries with reasonably high growth rates should borrow. But when a country s growth rate continues to increase, its saving rate would increase faster than its investment rate, so it is more likely to run a current account surplus.

The rate of growth reached 7.2 per cent in the period 2004 2005.

(a) Period of concentrated growth (1968 77)

That and good long stretches of the absence that makes the heart grow fonder.

High unit labor costs and unemployment rates are responsible, in turn, for reducing the trend rate of economic growth, mainly owing to under utilized labor, while the combination of lackluster growth and an ever mounting welfare burden has resulted in chronic budget deficits. The last surplus was in 1974.

But profitability should not be an end in itself it is a tool to help managers determine the most effective use of their resources and gauge the company s competitiveness and vitality. So instead of just paying out dividends, companies should use their profits to bolster their long term viability.

These changes do not directly induce economic growth, but they increase the economy s potential or long run income. Growth itself occurs as the economy begins to converge to this higher level of long run income.

Other possible constraints on growth included a lull or even reversal of the trend in appreciating housing prices in many large economies and a significant rise in long term interest rates and risk adverse financial markets.

In the mid 1990s, Liberia's economy grew by 122 per cent within two years after the conflict.

Another spike in the 1980s another spike in shows about control and power.

And in the three years that I was Finance Minister, they made an average of 360 million dollars profit per year.

During this period, contributions to regular resources grew by 12 per cent, to other resources regular by 57 per cent and to other resources emergency by 63 per cent.

The projections for growth in regular resources are conservative and UNICEF hopes that actual growth will be higher.

The strongest rates of increase were recorded in the first half of the 1970s.

The annual rate of growth during 1990 1996 was about 2.3 per cent.

The short and long term impacts of macroeconomic reform and liberalization on the development and growth of enterprises.

The Long Mystery of Low Interest Rates