There is not much “UP” from here.
I am here to tell you that our economy, the U.S. Economy is as good as it gets. Call it the new normal if you want but we will never see normal again, the Economy is Disrupted by Tech and Politics.
Gladly we are peaking at a positive level. I know that many are still not where they are comfortable on their current income and job security. They will need to disrupt their lives to achieve greater income and job security is not something that is likely for anyone in the future.
I am going to talk a bit about income inequality but maybe in a way that you have not read before. The great wealth of many big companies and the rich is disrupting the Fed’s ability to stimulate the economy with interest rate cuts. Almost any appropriate vehicle for investment of capital is quickly funded by these rich people or big companies. Profitable enterprises and ideas and many that are only possibly profitable in the very long term get Venture Capital and get plenty of it. Credit worthy borrowers get loans. The Fed lowering interest rates does not seem to increase lending or investment capital equipment or property. I percentage point or even two does not make someone with bad credit now more worthy or a losing business idea now a winner. It does tinker in the margins but we are not interested in marginal ideas when so many disruptive possibilities are on the table. Monetary policy only seems to have much effect on banks and trading where huge movements of money make large profits possible with trading on small margins.
With almost every potentially profitable enterprise being funded by the rich and big companies and still plenty of money looking for a home and bond yields not looking generous the stock market has been inflated just like you would expect after decade of economic growth and bull market. I know that the economic growth has been accused of being anemic but that is because expectation were set unrealistically high.
Fortunately the stock market has slowed it climb at a sustainable level with only localized bubbles in valuations, the market can weather moderate shocks so while there is a lot of room on the down side and not much on the up side it would take a serious shock to start a run. Mostly the market is worth its price unless many people lose the ability to afford to buy anything due to a catastrophe.
Technology, disruptive technology may cannibalize the tech sector and consumer markets. New tech creates new markets and new jobs but it also kills old markets and old jobs. Lets use Blue Apron as an example, do people eat more because of Blue Apron or do they just change where they spend the dietary dollars. I don’t see people using Blue Apron to save money and I don’t imagine that it increases their spending dramatically over time either, there a limits to most peoples disposable income. It is just one more business moving spending from local and brick and mortar to remote and online. It is one place where it replaces skilled labor with automation and do it yourself. I am not critical of Blue Apron, they and the like are not a problem, they just are the result of cannibalistic technology development. The auto killed the horse and buggy, raising and training horses and blacksmithing changed from being a common profession to being more of hobbies.
If Virtual Reality were to take off, I think it would cannibalize movies and TV and disrupt gaming. Solar and battery storage is going to cannibalize first coal, nuclear, hydro and oil for electricity generation and almost at the same time cannibalize gas and deasil for ground transportation except Rail or well it will take much longer for Rail. HyperLoop could cannibalize AirTravel.
Solar, Batteries, HyperLoop are all good, they are improvements. Eventually they will all be job killers but first they will be job creators. It is not the tech they creates the jobs it is the transition. Unlike NASA’s decision that it had to kill the Space Shuttle to fund the New Space Launch System, sort of a zero sum transition, just shuffled the bodies around and the contracts went to the same big companies. Solar, Batteries and HyperLoop will not be done by the big airlines or Oil/Coal Companies or Westinghouse or General Electric it will be in with the new companies while the Airlines and Oil Companies shrink over time. For a time we will have both and it will seem like growth but when the transition is complete things will be better except there will be less jobs.
The powers that be are trying to use growth and the development of the third world to stimulate demand. Even China understands that they can get no more business from the developed world we are China Saturated and at our limit. The development of the third world does create new markets both on the demand and supply side but it cannibalizes foreign markets during its transition and it begs the question. Is it wise to transform every person on the Planet into a middle or upper class consumer? The answer is yes but……..
Or let me make is a bit more specific, when will we able to transition every person on the Planet into a middle or upper class consumer without increasing the already horrific environmental degradations our ecosystems?
I said when but when will depend on how.