It sometimes seems that the world is going down the drain and that all is lost. Global environmental problems, major financial crises, wars, poverty, depression, divisive and dirty politics, government debt, inequality, unemployment problems in many countries, eternally-increasing production and consumption that “can’t work” with 7+ billion humans, and more. Our crazy world. Actually, on aggregate, things ARE getting better... but there are cracks in this beautiful picture. Read to the end to get the scoop.
This is a small part of an ebook I am almost finished writing which will come out in January 2017. Suppose for a minute that 90% of all production is done by machines (or cheap “offshore” labor). This is not realistic, obviously, because many jobs can’t be done by machines and must be done locally, but let’s just ponder this for a minute to get a qualitative intuition of what is happening. This would render most people useless and “should” cause real wages to adjust downward until production by workers in the country becomes interesting again. But suppose this “adjustment process” does not happen or happens extremely slowly.
The Fed will likely raise its key interest rate. It is all priced in, so what really matters is the stance and tone. We explore the key elements to be better prepared.
President elect Donald Trump promises to “make America Great Again.” The middle class is under pressure from all sides and real wages have not moved for 20 years for most people. Automation is replacing many ordinary workers with a few highly-qualified workers who design and manage technology and production. Low-cost labor in Mexico, China, India, Indonesia, Brazil, and many other places is replacing ordinary workers. Immigration is adding labor supply to the domestic economy. All this adds up to a hell of a lot of pressure on the 90% of ordinary workers. Welcome to technology and globalization. As you can see, it’s not clear that Trump (or Clinton) can truly make a big difference. Let’s explore further to see the bigger picture of what is going on and what lies ahead.
The Italian result is major and signals more hurdles on the grand EU project. I put this all in the bigger picture in my last blog post, which you should read in full to truly grasp the extent of the global tectonic plates shifting. The impacts are obvious: more depreciation of the Euro and additional "momentum" in the global push against globalization and large economic and political blocks. The Euro depreciated strongly already (I was short from the open!) and there may be more to come. Global markets are shifting and this opens up new opportunities and risks. Visit this website for an update on Euro and EU risk going forward. As explained in the last blog post, EU risk is THE risk for 2017 for the global economy, along with Chinese debt and housing. Stay ahead of the curve - it is worth it...
Globalization seems to be hitting a few roadbloacks worldwide. Brexit, then Trump, and now a referendum in Italy and an election in Austria that are taking the form of a vote about further “federalisation” of EU member states. Even weak victories could add cracks in the project and stress global markets.
For good or bad, populations of sovereign countries around the world are more and more skeptical of the “global market and community” and Italy and Austria are next in line, after the earthquakes that brought the downfall of Clinton and pro-EU politicians in the UK.
The signals of these developments along with specific economic, financial, and political conditions in many countries are all putting increased pressure on the EU, and 2017 may well be a very decisive and “dramatic” year for the state of the world and the EU as we know it. Read on to see clearly through the haze.