Rolling Back 200 Years of Growth
BALTIMORE, Maryland – The press reported mixed financial news on Thursday. House sales, oil, unemployment figures… up, down… the news left investors puzzled.
Two of many symptoms of the much-bewailed “populist backlash”…
Image via economyincrisis.org
Stocks went mostly nowhere. But amid the confusing noise was the sound of an alarm:
“Fall in U.S. productivity sparks fears of populist backlash as wages stagnate,” says a lumbering headline in the Financial Times. Most financial news stories are remarkably free from any informational content. Not this one. The headline alone practically bursts at the seams with it.
First (and here we pause, briefly, to thank the jackasses running the U.S. economy): For the first time in more than three decades, productivity is falling. The Conference Board estimates the rate of productivity growth in the U.S. in 2016 at MINUS 0.2%.
This means that real wealth is walking backward. Our economy is getting poorer… and less productive. What a remarkable achievement – reducing the value of human labor, in the world’s most advanced economy, after at least 200 years of vigorous growth!
Progress Comes to an End
As we’ve explained in these Diary entries: The feds and Wall Street colluded to replace precious real savings with unlimited phony savings (credit-backed money). But when something is available in unlimited quantities, people squander it.
They squander it on share buybacks, speculation, zombie giveaways, crony contracts. Real savings, capital formation, and investment – the kind that you need to boost productivity – go down.
Stanley Druckenmiller, here seen indicating the approximate length of the long term to an audience.
Photo credit: Scott Eells / Bloomberg
Says Stanley Druckenmiller:
“While the debt in the 1990s financed the construction of the Internet, most of the debt today has been used for financial engineering, not productive investments. Last year, buybacks and M&A were $2 trillion. All R&D and office equipment spending was $1.8 trillion. And the reckless behavior has grown in a non-linear fashion after eight years of free money.”
Our heart skips a beat. At the end of the day, all we have is time. Twenty-four hours in a day. Seven days in a week. Time is not credit. You can’t stretch it. You can’t “stimulate” it, or create more of it. That’s all there is.
You could double he PhDs at the Fed. You could double the number of patents or the stock buybacks and high tech IPOs. Still, the earth would spin at the exact same rate, and the sun would still come up earlier than you would probably like tomorrow.
Time is beyond the control of the Deep State, Congress, or the NSA. The only hope of material progress is to get more output out of each unit of time. There’s no other way. And if you can’t do that, you are dead in the water. If you get less output per unit of time, you are doomed to poverty.
Tempus fugit. Time only flows in one direction and there never seems to be enough of it – and as of yet, no-one can make more of it. The passage of time is a crucial driver of human action.
Image credit: Liseykina
That’s why this is the most important financial story you are likely to see this month… maybe this year… and maybe in your lifetime. Material progress has come to an end, and if this trend continues, we will eventually be crawling around on all fours and howling at the moon.
Chasing the Moon
Not only that, our system of government is doomed, too. And our money. We’ll take this up next week, but our advanced democracies depend on making promises now and making good on them later. This can only be done with additional output! No productivity increases (or worse, falling productivity), and the jig is up.
Why the calamitous drop in productivity? What does it mean for the future? The FT doesn’t seem to care. Instead, it draws our attention to the “populist backlash” that worked the paper’s Elitist-in-Chief, Martin Wolf, into such a lather earlier in the week.
All around the world, voters are losing faith in the elite. Austria was the latest country to give evidence of it, with the “populist” candidate, Norbert Hofer, barely defeated by the mainstream man.
And in the U.S., the latest polls show Hillary and Donald running neck and neck. Wolf considers this kind of “populism” a disease. But it is not populism that infected productivity and endangered Western Civilization. It is the cancerous programs of the Deep State’s insiders.
The moon, decorated with countenance of FT establishment mouthpiece and arm-chair central planner Martin Wolf. Maybe he should be sent there…one would first have to ponder though what damage he might do.
“Wages stagnate,” continues the headline. That is the news we reported last week, the study of the Levy Institute, showing that for 9 out of 10 Americans, we have suffered FOUR LOST DECADES since the 1970s.
That is, their time is worth no more today than it was when the first astronauts landed on the moon. In 1969, the U.S. could send men to the moon and bring them back. Now with productivity falling, the moon moves farther away.
Image captions by PT
The above article originally appeared at the Diary of a Rogue Economist, written for Bonner & Partners. Bill Bonner founded Agora, Inc in 1978. It has since grown into one of the largest independent newsletter publishing companies in the world. He has also written three New York Times bestselling books, Financial Reckoning Day, Empire of Debt and Mobs, Messiahs and Markets.