I read a Howard Gold Market Watch article yesterday with the above title. The above bears consideration. I read a book that looked at the aftermath of people wiped out in 2008 called Nomadland which I found compelling. It tells the tale of middle to upper middle class people who were essentially wiped out in the 2008 downturn. First went the job, then the pension and savings in an attempt to save the stability afforded by having an address, then went the house and people moved into their cars to suffer day work and gig contracts as the means to buy their daily bread. The sugar beet harvest is one of the best gigs all year, but it in reality is a bone crushing experience, especially for a 70 year old once college admin who burned up all his dough trying to save his address.
I’ve listened to a series of interviews (here and here among others) with Jeff Booth. His argument is basically about the creative destruction of technology causing an exponential deflation, and how the FED’s around the world will try mightily to ignite inflation to monetize the debt but will fail because the inflationary action of printing money is linear growth, while the deflationary action of technology is exponential, meaning it’s asymmetric. Broke Americans are also deflationary. If technologic deflation does prevail according to booth the problem will be solved.
5 Replies to ““Half of Americans over 55 may retire poor””
Booth’s idea of tech driven deflation may come someday but doesn’t seem imminent. The gut feeling that I have is that those who have been hurt the most economically and will continue to get the worst of it have come from marginal or service work based backgrounds. From my perspective, the core middle and upper middle class seem to be doing relatively fine right now. I think there’s a good chance of ongoing helicopter money for those less well off. The Fed will do everything it can to prevent deflation, but if we do end up there anyway there will be consequences.
The consequences from 1937, the second wave of the Great Depression was WW2. Pretty much you don’t have any idea how “well things” are going because “how well” is all narrative. 50% of the restaurants in NYC are OUT OF BUSINESS. That’s because the lunch crowd no longer crowds. The “market recovery” amounts to 6 stocks. The 10 year is yielding 0.69%. If inflation is 1.5% you loose 0.81% on your money. If the FED is successful and prints a 3% inflation you loose 2.31% on your money. Loosing money is not what I call “doing well”. Oil has dropped. A year ago it was 55+ today 37 a 30% DEFLATION. At 30 there is an exponential increase in oil companies going out of business plus all the service industry causing job loss and job loss causes deflation. Slapping a coat of paint (helicopter money) on a sinking ship doesn’t stop the sinking. The reason for the collapse is no demand because no one goes anywhere. Same reason for those restaurants, no demand. No demand = deflation because of the supply demand curve. I think we are about to enter insolvency.
Fascinating post – and interesting Q & A above.
Not quite sure about your view of the consequences of the second wave of the Great Depression. That is, lots of factors, including the Great Depression, led to WW2, see, for example: https://en.wikipedia.org/wiki/Causes_of_World_War_II
The great depression didn’t “cause” WW2 but it took a world war to end the depression. In the 30’s the US became very authoritarian and anticapitalistic in the name of serving “the people”. FDR did everything Trump has done and more but the narrative is FDR = Good Trump = Bad. In England they called the protestant Elizabeth “Good Queen Bess” and her Catholic sister “Bloody Mary”. Both women were equally despotic but history chose the protestant, and we stupidly believe the historic narrative because we weren’t there. We are in huge debt. Deflation makes the debt worse because you pay your debt in ever more valuable dollars in a state of deflation, whereas you pay your debt with cheaper dollars with inflation, so inflation allows the government to NOT deal with the hard truth, but it’s a hidden wealth transfer from the people to pay for bad political policy. 2% inflation means you loose half your wealth in 35 years 3% inflation means you loose half in 23 years. 0% means your wealth is maintained. Since we are so indebted the govt will try to force a wealth transfer through inflation. Booth’s argument is technology is exponentially deflationary through the power of creative destruction. His argument is to just let the creative destruction happen and the exponential growth in productivity due to technology will overwhelm. Beats hell out of a third world war.
Thanks for the clarification.
More years ago than I care to remember I was taught by a history teacher who repeatedly tried to explain to us [then] youngsters that history is always written by the “winning” side – and thus is inherently unreliable. Another of this teachers favourite pet theories was that history is there to be learned from – but, rarely is it learned from.
As it happens, I share your concerns re inflation/deflation and , of course, WW3. However, there are an awful lot of parallels around today to things that happened along the road to WW2.