Implications Of A New Epoch

Implications Of A New Epoch

There's considerable debate around whether developed countries are headed for a high inflation regime. The obvious real-world concern is that such an environment, if not paired with robust growth, would be disastrous for households and "regular" people. In a world where inequality in advanced economies is approaching Belle Époque extremes (figure below), surging prices for necessities and everyday goods and services could lead to social unrest. In "America’s Economic Divide In Two Stories,"
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7 thoughts on “Implications Of A New Epoch

  1. Ironically, the cure to stagflation in the ’70s was the shock of higher interest rates engineered by the Volker-led Fed. Ripping the band-aid off, if you will. Now, in part due to the fecklessness of corrupt, long-serving members of Congress and key regulatory agencies, the leverage in the system today is much, much greater — as would be the pain associated with rapid band-aid removal. But as all athletes know, no pain, no gain. If we want to avoid the kind of socioeconomic crisis you allude to, we’re going to have to deal with some pain.

  2. I have seen accounts of Europe after a bout of the bubonic plague. That experience may be somewhat more germane to our experience than the 70s stagflation. In the account of the economy, historians recounted how wages took a jump since the labor force available to landowners particularly had dropped. Now of course there are major differences now too. For one, we are not agrarian and can substitute capital for labor to some extent much more than in 1300s. Also the labor force is more mobile both for immigration and working remotely. Some workers are getting sick and dying in our situation, more commonly some are leaving the labor force due to early retirement or long covid- in the 1300s they just died. So society is going to be handed a bill for long covid. This is my long winded way of saying we may get a one time wage increase combined with a one time increase in labor productivity as capital is substituted for labor in some jobs. It does not necessarily portend a long run increase in inflation once the economy adjusts to the new level.

    1. Reading your comment I was struck by the transition in labor mobility that has arisen because of the many new tools for remote work that have been developed in the last couple of years. People don’t just work remotely for their local employer any longer. Instead, many work from sites several states away. My daughter’s boss is in New Jersey while his direct reports are mostly in KC. One of her best friends lives in suburban KC and works for an employer in Oregon. Many folks have found they can be mobile and effective without having to move. “Regular” blue-collar and minimum wage folks mostly don’t enjoy this luxury but a great many white-collar professionals can be fully mobile without moving. Thanks for your insight.

  3. Per Warren Buffett in 2006: “There’s class warfare, all right, but it’s my class, the rich class, that’s making war, and we’re winning.”

    Quote from a female Trump supporter that just scrolled by on a news channel: “I see a civil war coming…”

    Some people saw this war coming before others, hence the militarization of the police during preceding decades. That tells me that the winners of the class war intend to hold onto their winnings with whatever force is necessary.

    I wonder how long the Republicans will be able to control the mob they have gathered and the value of the ashes of Buffett’s holdings in the future.

  4. Are you suggesting that there are a lot of American patriots out there who are getting sick and tired of the Republicans and their manipulations and would risk it all by making the ultimate sacrifices to save this democracy?? As opposed to the idiots out there who through ignorance and fake news are trying to destroy it possibly not understanding what they’re doing. Ergo civil war?

    1. Nope, I’m suggesting nothing about patriots or idiots. I’m simply observing that the paupers with pitchforks also have pipe bombs and they are now openly talking about a civil war that could destroy our fragile infrastructure. In which case; yours, mine and Warren Buffet’s US stocks and bonds could be worthless.

  5. One difference between now and the 70’s is the politics. Back then Parties had differing views about issues. Both republicans and democrats had loved ones dying in Vietnam, loved ones who were drafted. The filibuster hadn’t gone nuclear. Legislation could be passed with votes from both parties. I guess this is a long winded way of saying government today no longer works and a significant number (maybe 30+%) of citizens are heavily armed and have no relationship with facts or the truth. Add that to economic analysis and a Goldman forecast might be the least of our worries in 2024.

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