LESSONS: THE TWO PER CENT RULE OF THUMB.

LESSONS: THE TWO PER CENT RULE OF THUMB. Kids, I am linking to this article because it repeats an important economic and historical fact: “over the long-run real per capita economic growth in the United States, over and above inflation, has been remarkably steady at just under 2%.” That fact is worth committing to memory. (Developing countries can achieve much higher rates of growth as they imitate more successful economies.) I posted earlier on this rule of thumb here Using the Rule of 72, at a 2% growth rate, per capita income in the U.S. would double every 36 years. The article adds an important implication of the Two Per Cent Rule: “if aggregate real per capita growth rate in the economy is a bit under 2%, the broadest sectors of the economy, like the corporate sector, have to deliver about the same per capita growth rate in the long run.” This article is entitled “The Basic Speed Law for Capital Markets Returns.” You will not be surprised that, in the long run, the Two Per Cent Rule applies to stock market prices taken as a whole.