Saturday, July 22, 2017

This Cannot Be The New Normal / By: Bruce Wilds

The Above Chart Is Not A Reflection Of Normal! 
The confusing market action has reached the point many of us are now wondering is this the new normal. Even as the market has forged its way into new territory the new highs have done little to alleviate the concerns of many investors that something is very wrong. More important than how the economy appears to the casual observer is the strength of the foundation on which it's built. This extends to issues such as growing inequality and just where we are headed when it comes to people being able to earn a living in the future. Jobs, jobs, jobs, much of this is about what is produced and how the fruits of our labor are distributed.

The current economic trends are unsustainable and unworthy of our faith. The markets reflect what I consider a total disconnect from the economic reality of sustainability, the numbers going forward simply do not work. I find little reassurance in trends that filter much of society's money and wealth into paper assets and promises rather than what we see as real and solid tangible assets. This has masked inflation by taking newly printed money out of direct competition for tangible goods which would normally drive their prices higher. Instead, it has made many goods downright cheap in comparison to prices people pay for things that are not real and often of questionable value.

A matter that weighs heavy upon both the economy and society, in general, is the productivity debate. Economists trying to explain the apparent structural slowdown in productivity growth have been forced to ask where is the missing increase? No easy answers exist to the questions arising from our evolving economic situation and the encompassing concerns about how we measure structural shifts in the labor market, a dearth of investment opportunities, productivity-diluting technological innovations, technology-driven skills mismatches and growing inequality. Efforts to increase demand and pull productivity forward have failed and resulted in massive debt growth across the world.

As Robots Take Our Jobs What Becomes Of Us?
Whether what we produce is allowed to flow to individuals or is whisked away by government for projects they claim serve the "greater good" or in the end directed in other directions is of great importance. This even translates into the decision to produce guns or butter and should include the fundamental question of, how much productivity growth do we really want or need considering the long-term cost to our planet. It should be pointed out that for many individuals, especially those residing in the wealthier developed countries, the top priority is not simply becoming richer, but developing a richer life. Living in a way that produces a better overall outcome.

Over the long-term what the economy is presenting us with today cannot be called the new normal in that little of we call normal is reflected in this economy. While growing debt and expanding credit have moved demand forward we should not delude ourselves into thinking it will be repaid. Much of it will slip into default exacerbating future problems. It may be time for mankind to take a moment and ponder what the human animal really wants, and the fact is we are still really just an animal and the answer might be something totally different from what we are being told by those we have given the power to shape our future.

Two Very Different Pictures Of The Future
As to whether it is time to rush off and embrace what some see as a "brave new world" the debate continues. We should remember with opportunity often comes risk. One area some people see as the answer to our problems is the development of artificial intelligence also known as AI. Some forward thinkers including Elon Musk have warned of what he called the possibility of "bad utility value" saying mans position on this planet depends on his intelligence and if his intelligence is exceeded by AI it is unlikely we will remain in charge of the planet. Some of these thoughts are echoed in an article by John Havens that start out, "I, for one, do not welcome our new robot overlords"

At this point, the idea of a sustainable and balanced future seems rather elusive and it does not seem that we are on a course towards perpetual bliss. As this is being written the drums of war drown out reason and the threat of war with countries such as Russia, North Korea, or even China are all too real. Over the years as society has become richer we have seen the relative value placed on different parts of our lives shift. Overall those in charge and the elites have failed to create a compelling answer to our woes. It will be most interesting as we progress to see if we can channel our time, income, and creativity towards solving our problems rather than diverting our energy into creating new ones.

Footnote; Today we find we are still trapped in the box Ben Bernanke built with no way out, compounding our problems is the fact we never received the promised economic growth promised to flow from his financial remedy. The article below explores this situation.

1 comment:

  1. Bruce:
    Thank you for this insightful that quite clearly addresses multiple areas of concern shared by other thoughtful people (in the sense of observing / evaluating what is happening - what is the future destination of humankind in terms of meaningful quality of life). So much more might be many examples of misdirected goals, lack of a vision that will best serve ALL strata of society,the corruption of what we have come to view as important.
    I sometimes wonder if the characters who populate Washington and Wall Street even have the capacity to see / understand how misdirected they are in so many regards. Most likely very few would fall into that category...are even capable of seeing the sadly destructive compromise of quality of life for multiple millions that has resulted from decisions based on poorly reasoned, short sighted objectives/ goals. Your well reasoned articles, written with a broad perspective, offer a small glimmer of hope that wisdom and reason are still alive and well in the hearts and minds of at least some among us.