Monday, March 16, 2009

 

Market Futures

The "it really IS different this time" that nearly everyone, bull and bear alike, ignores is that we are now nearly completely a middle-class, service society. The change was beginning in the 1970-1982 "lost decade", but in 1980 there were still nearly 30% of American workers in manufacturing. The figure is less than half that now.

This is important because white collar workers are not organized into unions, which weakens them when dealing with specific employers. However, educated middle class citizens have much higher expectations of life than do industrial workers. The upper portion of Maslow's hierarchy is part of the political equation these days.

A middle-class service nation will not accept the level of impoverishment that the agro-industrial one of the 1930's did. The folks in government know this and will spend with nearly unlimited abandon to prevent a further melt-down. And you Republicans can shut right up. Had John McCain won he would have done exactly the same thing, or been impeached for incompetence after a calamitous 2010 election wiping out the remaining Republican strength in Congress.

So, I do not expect that the stock market will reach the "standard" 70-80% discount at the bottom. However, neither will it turn in the 10% returns for a decade that normally follow that severe a crash, either. I expect that stagflation is the future for the US because eventually the well of public spending must and will run dry, and we have largely lost the ability to make things needed by human beings other than packaged foods and airliners.

It's not that we have lost the mental ability to do so; we've lost the desire. And anyway, even if we doubled our industrial output, so much of process manufacturing is automated with various genera of robots that employment would probably rise only three or four percent of the workforce.

So, as commodity prices rise around the world from the inevitable pressures of the ever-growing population, the US will experience a steady erosion in the value of the dollar and resulting increases in the cost of imports. At the same time, given our sheer damn cussed refusal to devote adequate resources both financial and human to education, we will increasingly be like the UK, living on tourism and artistic exports. It's not a pretty picture but we certainly have enough housing to provide for a population 1/3 again as large as it is now, and Dios knows we're not short of food. With a concerted effort to reduce our energy consumption -- and underemployment is a great way to do that -- we can muddle along quite nicely for a century on our accumulated wealth.

Genteel decline, again very much like Britain, is not so awful a life.

Of course to accomplish this we have to recognize that the 21st century belongs to Asia (as do the future ones, clearly) and quit trying to be the biggest swinging dick in the neighborhood. We have to learn to treat one another with a higher degree of respect and compassion, but we certainly can do that. As an excellent example follow this link: http://www.greatdanepromilitary.com/Life/index.htm. Notice that the domain is "Great Dane Pro Military". A dues-paying Democrat like me wouldn't expect that address to be sending such uplifting images and messages. But someone who chose that domain did so. I think that's pretty hopeful.




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