Nine years ago, January 2010, was the bottom of what I’ve come to call the Managed Depression. Here is a piece from that time which is still relevant. At that time, we were awaiting a “recovery” and hoping for productivity gains to get us out of it. But they didn’t. And the core issues outlined here remain.
What would make a recovery sustainable? If you ask an economist, they’d tell you that what makes any economy grow and prosper is, ultimately, what they call “productivity gains”. That’s the ability to make more with less that allows a people to prosper. During the 1990s this was given as the reason why interest rates could remain low and we could have one Hell of a party – a sloppy, hazy bender. We live in the hangover that resulted, but have we really learned how intoxicating this one, simple idea is?
We recently stated that this is a “Bear Market.” So what does that mean?
It’s not all that scary, at least not once the market really settles into bear territory. In fact, it can be a great time of opportunity for many investors, particularly away from stocks. It’s worth spending a moment contemplating what a bear market is and why it’s important.
I hope everyone had a good Christmas. I’ve been slow to write about the stock market for two reasons. The first is that it would ruin the holiday cheer, and the secondly this is a long developing story that I have written about for a year now and will probably write about for the next year.
But we’ve reached an important threshold. It’s now down 20% off the peak, meaning that we are in a Bear Market. We haven’t been in one for a decade, and there hasn’t been a nasty one for at least two decades, so let’s run down what that means.
In the movie Star Trek: First Contact, the Enterprise if flung back in time to the year 2063 and has to return home. They quickly realize that this is a very important time because it is the moment that the Earth made first contact with Vulcan, setting up the entire universe as they would all come to know it. The great abundance, the wonder, the adventure all hinged on this one moment.
There was one problem, however. Earth, at that time, still used this thing called “money.” The great abundance had not yet kicked in and the crew of the Enterprise had a lot to learn about how to get things done if they wanted to get home.
It’s a great movie for many reasons, generally starting with Patrick Stewart as Captain Picard. But this vision of the future, made at that moment, is particularly compelling. Abundance so great that money isn’t necessary? It’s one vision of the future, certainly. But is such a thing possible?
Futurists and economists often spend a lot of time contemplating the systems and hardware of the world unfolding around us. The promises of the information age, quantum computing, Industry 4.0, and many other well laid plans are expounded on at great length by enthusiasts with imagination. Yet in all of this, there is something usually missing, something incredibly important:
How is the world that is coming going to work for people? How will it help us all have a better life?
We can see fractures already. Economic systems which bring prosperity do so at a large cost in nature and workers. Families are under strain from changing times, yes, but largely due to demands for more and more work at greater distances. Automation takes away much of that work, bringing more misery than comfort. And the prophesy of abundance is a chimera.
Correcting this is what People’s Economics is all about.
Call it the “Fourth Industrial Revolution” or the more hip “Industry 4.0” if you like. What matters most is that industry, or the process of making things, is changing in ways that seem fundamental and permanent. The world is moving on to a new era which, difficult as times like this can be to understand, appears to be rather well defined and describable.
If you do a deep dive into Industry 4.0, however, there is still something missing. It’s the “why” of the process which seems to be at least assumed, if not elusive. Not just why it is happening, but why it is being driven now and why it is expected to cast aside Industry 3.0.
What’s missing in the increasing chatter of Industry 4.0 appears to be the fundamental force behind it, which is the decline of what we might call “capitalism” in favor of a purely market centered, low overhead “marketism” approach.
Inflation is certainly surging, it remains to be seen how much of a problem that is. What we do know is that some regions of the nation, particularly cities where businesses have embraced technology, are surging ahead quickly. Some a bit too quickly.
In a nation already divided, the success of some cities is only accelerating the divide. If they become too successful their high cost may ultimately slow growth. But for now, the benefits of the recovery are heavily centered on a few places.