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Wealth is How You Feel

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Around the world, two stories have been consistent since 2008 – the developed world is struggling with a depression while the developing world largely charges ahead.  The two worlds have never been so far apart as the careen towards similarity.  But in this hemisphere, three stories have come to show where it all comes together – how “wealthy” is what a nation feels more than how it is.

Forget how Japan and Europe are wallowing in desperation for a while – on this side of the big ponds things are happening.  It may be slower than anyone wants, but change is happening.  The reactions to that change show that my favorite saying is still true – that while people are people, cultures are cultures.  Wealth, or at least the feeling of wealth, is a state of mind.

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Cold Currency War

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In the Cold War, the foundation of diplomacy was mutual fear and hatred.  With that behind us, interdependence  has introduced a new system which includes much closer relationships – and something more like angst and loathing.  So has our relationship with China evolved.

As China has awakened, the GDP has grown by a factor of ten since 1990.   The population went from 22% urban to 52%.  All of this came at the expense, and mutual support, of hungry US consumers, corporations, and our nearly limitless need to finance our debt.  It was too much, too quickly, and wise investors saw that it was a bubble ready to pop – or at least relax the insane pace.

That day is coming very soon.

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Professor Bernanke, Again

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I think most of us would agree that people who have, say, little formal schooling but labor honestly and diligently to help feed, clothe, and educate their families are deserving of greater respect – and help, if necessary – than many people who are superficially more successful. They’re more fun to have a beer with, too. That’s all that I know about sociology.
– Ben Bernanke

President Obama has made it clear that next January, when his term is up, Chairman Bernanke is going to be replaced.  It’s not like the big guy is being fired, though.  “Ben Bernanke’s done an outstanding job,” Obama said in an interview with Charlie Rose.  “He’s already stayed a lot longer than he wanted or he was supposed to.”  What else would he want to do than to be arguably the most powerful man in the world?  Simple.  The title “Professor Bernanke” always suited him much better than “Chairman Bernanke”.

That’s just about the only thing that his admirers and critics can agree about him  – although the former might laugh it out while the latter would say it though clenched teeth.

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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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Credit Unions

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Fed up with banks?  You’re hardly alone.  Credit unions have grown dramatically in the last 20 years, fueled largely by high fees charged by commercial banks.  Low rates for ordinary loans are also a big draw.  But for all the growth, not much has been written about credit unions other than the occasional puffy story about how much a consumer can save by ditching their bank.  That’s not to say that the growth has gone unnoticed at all – or indeed that it isn’t creating its own problems that need to be addressed.

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