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A Coming Golden Age. Really.

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Perhaps the economy is a lot like the weather – if you wait long enough, it has to get better.

As we’ve noted before, income inequality is likely to improve in the US and the rest of the developed world once the postwar “Baby Boom” starts to retire.  With as much as a quarter of the population removed from the labor force, there will be more jobs to go around – perhaps even too many.  Wages are likely to rise and opportunities for employment will be everywhere.

If that doesn’t sound good enough, recent studies have suggested that inflation is likely to be low as the population ages, meaning interest rates will remain low and capital is likely to be plentiful.  It’s starting to sound like this Depression is going to end with a golden age.  Seriously.

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This Time Really is Different

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The year was 1930.  The greatest depression in US history closed around the nation like a dark shadow.  Congress was desperate to do something that put the nation to work again.  What could do it?  Rep. Willis Hawley (R-OR) and Sen. Reed Smoot (R-UT) had a plan – close down imports and make Americans buy products made in America.  Their plan, the Smoot-Hawley Tariff, raised import taxes on over 20,000 items to about the highest level they had ever been.  Nations around the world responded with their own tariffs, starting with Canada, slashing all trade in and out of the US in half.  Nearly everyone agrees that this made the Great Depression much worse everywhere.

Flash forward to 2013.  Japan returns the Liberal Democratic Party to power on the promise to put the nation to work again.  Their plan?  Not to shut down trade, but to increase it – goosing exports by lowering the value of their currency and making their stuff cheaper.

The situations and the plans are very similar, but the underlying assumption is completely different.  The world has passed from Nationalism to Globalism as the basic driving force.  And that difference is worth thinking through.

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You Were Worried About China?

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The best way to destroy the capitalist system is to debauch the currency.
– Vladimir Lenin

Barataria was a bit skeptical about Japan’s “Abenomics” back in January.  The first results are in, and they are amazing.  Their economy grew by a developed-world-leading 3.5% in the first quarter, and the stock market is up 28% in 2013.  It’s been called a “wealth shock”, and it’s very welcome in a nation that has been flat for two decades.   What could possibly go wrong?  Just about everything – and it’s likely to affect us here in the US.  Ready for really cheap electronic gadgets?  How about stagnating employment?

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May You Live in Interesting Times

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There is an awful lot going on in the world right now.  It’s hard to find any one thing that is worth writing about, given all of the news.  So let’s run down everything all at once.

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The Euro Forced Marriage

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The time was a year before the Euro launched, the place was the tiny town of Burghausen, Germany.  Busloads of people from their sister city in France were welcomed with fluttering tricolors silently proclaiming liberty, equality, and brotherhood. It was declared “French Week” through the town as menus in German gave way to French and the whole town celebrated unity.

I asked Herr Mitterer, the owner of the Hotel Post, if this grand “Eurozone” idea was going to work.  “It has to,” he replied, “We’ve seen the alternative.”

Underneath the giddy celebrations at the end of a long period of expansion, the Euro was launched in 1999.  It was always a forced marriage, a necessity blessed like any marriage with talk of happiness and great times ahead.  But at the first sign of trouble the cracks are showing.  Fourteen years on it is at a turning point – move closer or forget the whole thing?

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