Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
Chinese Tech Stocks CCP Paranoia and Best AI Tech Stocks ETF - 26th Oct 21
Food Prices & Farm Inputs Getting Hard to Stomach - 26th Oct 21
Has Zillow’s Collapse Signaled A Warning For The Capital Markets? - 26th Oct 21
Dave Antrobus Welcomes Caribou to Award-Winning Group Inc & Co - 26th Oct 21
Stock Market New Intermediate uptrend - 26th Oct 21
Investing in Crypto Currencies With Both Eyes WIDE OPEN! - 25th Oct 21
Is Bitcoin a Better Inflation Hedge Than Gold? - 25th Oct 21
S&P 500 Stirs the Gold Pot - 25th Oct 21
Stock Market Against Bond Market Odds - 25th Oct 21
Inflation Consequences for the Stock Market, FED Balance Sheet - 24th Oct 21
To Be or Not to Be: How the Evergrande Crisis Can Affect Gold Price - 24th Oct 21
During a Market Mania, "no prudent professional is perceived to add value" - 24th Oct 21
Stock Market S&P500 Rallies Above $4400 – May Attempt To Advance To $4750~$4800 - 24th Oct 21
Inflation and the Crazy Crypto Markets - 23rd Oct 21
Easy PC Upgrades with Motherboard Combos - Overclockers UK Unboxing - MB, Memory and Ryzen 5600x CPU - 23rd Oct 21
Gold Mining Stocks Q3 2021 - 23rd Oct 21
Gold calmly continues cobbling its Handle, Miners lay in wait - 23rd Oct 21
US Economy Has Been in an Economic Depression Since 2008 - 22nd Oct 21
Extreme Ratios Point to Gold and Silver Price Readjustments - 22nd Oct 21
Bitcoin $100K or Ethereum $10K—which happens first? - 22nd Oct 21
This Isn’t Sci-Fi: How AI Is About To Disrupt This $11 Trillion Industry - 22nd Oct 21
Ravencoin RVN About to EXPLODE to NEW HIGHS! Last Chance to Buy Before it goes to the MOON! - 21st Oct 21
Stock Market Animal Spirits Returning - 21st Oct 21
Inflation Advances, and So Does Gold — Except That It Doesn’t - 21st Oct 21
Why A.I. Is About To Trigger The Next Great Medical Breakthrough - 21st Oct 21
Gold Price Slowly Going Nowhere - 20th Oct 21
Shocking Numbers Show Government Crowding Out Real Economy - 20th Oct 21
Crude Oil Is in the Fast Lane, But Where Is It Going? - 20th Oct 21
3 Tech Stocks That Could Change The World - 20th Oct 21
Best AI Tech Stocks ETF and Investment Trusts - 19th Oct 21
Gold Mining Stocks: Will Investors Dump the Laggards? - 19th Oct 21
The Most Exciting Medical Breakthrough Of The Decade? - 19th Oct 21
Prices Rising as New Dangers Point to Hard Assets - 19th Oct 21
It’s not just Copper; GYX indicated cyclical the whole time - 19th Oct 21
Chinese Tech Stocks CCP Paranoia, VIES - Variable Interest Entities - 19th Oct 21
Inflation Peaked Again, Right? - 19th Oct 21
Gold Stocks Bouncing Hard - 19th Oct 21
Stock Market New Intermediate Bottom Forming? - 19th Oct 21
Beware, Gold Bulls — That’s the Beginning of the End - 18th Oct 21
Gold Price Flag Suggests A Big Rally May Start Soon - 18th Oct 21
Inflation Or Deflation – End Result Is Still Depression - 18th Oct 21
A.I. Breakthrough Could Disrupt the $11 Trillion Medical Sector - 18th Oct 21
US Economy and Stock Market Addicted to Deficit Spending - 17th Oct 21
The Gold Price And Inflation - 17th Oct 21
Went Long the Crude Oil? Beware of the Headwinds Ahead… - 17th Oct 21
Watch These Next-gen Cloud Computing Stocks - 17th Oct 21
Overclockers UK Custom Built PC 1 YEAR Use Review Verdict - Does it Still Work? - 16th Oct 21
Altonville Mine Tours Maze at Alton Towers Scarefest 2021 - 16th Oct 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Where the World Is Going in 2020

Economics / Global Economy Jan 03, 2020 - 04:32 PM GMT

By: Patrick_Watson

Economics We all want to know the future. Unfortunately, the future isn’t talking. It’s just coming, like it or not.

We can, however, make educated forecasts. I think John Mauldin is broadly correct: the future is bright, but we’ll go through darkness first.

In fact, many of us are already in pretty dark situations, “left behind” in a supposedly thriving economy. We’re told there is no inflation even as the real cost of living rises ever higher.

Where is it leading us? To answer that, we have to think about how we got here.



America Alone

In his recent "Inflationary Angst" letter, John Mauldin shared an inflation chart, broken down into spending categories.

The cost of things average people must buy—healthcare, education, housing—tends to have risen more than wages did over the last two decades.

But aggregate inflation measures, like the Consumer Price Index, don’t show this. Falling prices elsewhere held them down. Those tend to be “luxury” goods… which is why inflation is no problem unless you’re poor.

My friend Bruce Mehlman had a different reaction on Twitter.



Source: Bruce Mehlman

He’s right; the fastest-rising spending categories are things you can’t easily import from other countries. If you suddenly need surgery, you’re going to the nearest hospital pronto.

On the other hand, US hospitals and colleges do import certain components and personnel. That’s why we have foreign-born nurses and professors. It doesn’t seem to have reduced their costs, though.

Bruce’s latest slide deck is about global trends re-shaping the world. He distilled his outlook into a two-factor equation: globalization vs. regionalization, US-centric vs China-centric.



Source: Bruce Mehlman

I realized long ago that globalization was on its last legs. I also think trade conflict will continue and even intensify. So Pax Americana or Pax Sinica (the top two quadrants) aren’t very likely.

The bottom left scenario—what Mehlman calls a “Free World United”—would be a partial end to trade wars, with the US and its allies uniting against China. That might happen but not without a leadership change in Washington. And maybe not even then.

So the “America Alone” scenario within an otherwise China-centered world seems the most likely. For Americans, this will probably mean even greater economic difficulties than we face now.

How people who are already struggling will deal with it is unclear. But it probably won’t go well.

Small Winners

Recently, I shared a report by Gavekal Research co-founder Louis-Vincent Gave called “The Knowledge Revolution and Its Consequences".

Louis has a great way of systematically thinking through a situation to see where it leads. He thinks technology and political trends are aligning against mega-powers like the US and China. His key points:
  • Modern Western economies have become knowledge based. This means Marx’s three factors of production (land, labor, capital) now have a fourth.
  • Neither physical strength nor access to capital are sufficient for economic success. Power now resides with those best able to organize knowledge.
  • The internet has eliminated “middlemen” in most industries. In a representative democracy, politicians are basically middlemen.
  • Hence, the knowledge revolution should bring a shift to direct democracy, but those who benefit from the current structure are fighting this transition.
  • This is the source of much angst around the world, including the current wave of popular protests.
  • Smaller political entities should find the evolution toward direct democracy easier to achieve than big, sprawling governments.
  • Today’s great powers have little choice but to spend their way to political stability, which is unsustainable, and/or try to control knowledge, which is difficult.

The conclusion is that future growth potential should be highest in smaller countries with stronger, more flexible political institutions. The US, China, and most of Europe don’t qualify. Places like New Zealand and Switzerland have better odds.

That brought to mind one of my favorite Enlightenment philosophers, who happens to have been Swiss.

Subhead

Eighteenth-century thinker Jean-Jacques Rousseau wrestled with how to preserve individual freedom when we also have to depend on each other for survival.

Rousseau saw politics as a social contract between a sovereign and citizens. What we call “government” is the interface between them.

The sovereigns of Rousseau’s time were mostly kings, but he envisioned a democracy in which the people collectively were sovereign. But then he ran into a math problem.

In a tiny democracy of, say, a thousand citizens, each possesses one-thousandth of the sovereignty… small, but enough to have a meaningful influence.

Each individual’s share of sovereignty, and therefore their freedom, diminishes as the social contract includes more people. So, other things being equal, Rousseau thought smaller countries would be freer and more democratic than larger ones.

How do we reconcile that with democracy in a US composed of 330 million citizens? I’m not sure we can. It worked pretty well for a long time but maybe, as population grows, the math is catching up to us.

If so, the options are a non-democratic US or a smaller US. Or maybe no US at all.

This land we now inhabit wasn’t always the United States. Nothing requires it to remain so. At some point, it will develop into something else.

When and how that will happen, we don’t know yet. But we know it will.

The Great Reset: The Collapse of the Biggest Bubble in History

 New York Times best-seller and renowned financial expert John Mauldin predicts an unprecedented financial crisis that could trigger in the next five years. Most investors seem completely unaware of the relentless pressure that’s building right now. Learn more here.

By Patrick_Watson

© 2019 Copyright Patrick_Watson - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in