I sure hope so because that appears to be the only option left.
And it also appears that debt-fueled growth is the path that both the U.S. and Germany have chosen.
Past is not prologue but it is the only guide we have. And unfortunately we only have one time and price series. Someday it will all end, it may be tomorrow, it may be in a couple hundred years as stasis and/or entropy and/or civilizational catastrophe makes its mark.
Here's our boilerplate intro to extrapolating the past into the future:"Industrial Revolution Comparisons Aren't Comforting"
Partly because of Eddington's Arrow of Time, at least in the mundane everyday experience, we only have one economic history dataset to work with. Because of this I used to argue with people who said this time will be like the last time but found that approach neither satisfying nor enlightening. I don't argue anymore, I just observe, like a kid watching a bug and wonder where the almost metaphysical certitude would be coming from, because, truth be told, nobody knows how this all works out....
....Again, we only have one dataset. We can say that U.S. stocks have returned 'X' over 'Y' time period, and for long periods we've been able to extrapolate those variables, but no one knows what tomorrow brings.
Don't let your kids grow up to be risk managers.
From Charles Hugh Smith's substack, July 16:
If we borrow all of tomorrow's prosperity to spend today, there won't be any future prosperity, there will only be penury.
The developed nations share many of the same sources of stagnation:
1. Demographically, their cohort of retirees drawing government benefits is expanding with no end in sight while their workforces are shrinking;
2. Their models of funding government programs institutionalized 50, 60 or 70 years ago no longer provides enough income to cover government spending;
3. As their populations age, demand/consumption is stagnating as older people spend less on everything other than healthcare, and the cohort of younger people getting married and starting families is in steep decline;
4. Attempts to stimulate consumer spending via central bank/state stimulus are now increasing inflation, crimping both household and state spending as debt service costs rise;
5. Institutionalized processes that worked in the "boost phase" of economic growth are now hindrances as following established processes are the focus rather than adapting to get results;6. The expedient "solution" to soaring demands for government spending (healthcare and retirement programs are now a third or more of state expenditures) is to fund spending with borrowed money--selling government bonds which then increases the nation's sovereign debt and the interest that must be paid on that swelling debt;
7. The low-hanging fruit in the economy have all been plucked, and while there are high hopes for an energy transition and AI, there are no guarantees these will boost productivity enough to generate the growth needed to "grow our way out of debt;"
8. The proposed solutions are all forms of financial engineering--lowering interest rates, introducing stablecoins, etc., all intended to lower the cost of borrowing from the future to stimulate "growth" today in the hopes of "growing our way out of stagnation and debt."
Richard Bonugli and I discuss these core issues in our podcast The Challenges of the G7 world (33 minutes), issues which boil down to one basic question: is pulling the levers of financial engineering enough to "grow our way out of stagnation and debt," or are more fundamental reforms required?
The key to "growing our way out of stagnation and debt" is to boost productivity. In the podcast, I refer to Total Factor Productivity, which is an attempt to "capture the 'secret sauce' of how an economy or business produces more output with the same or fewer inputs."....
....MUCH MORE
Yeah, that pulling forward future growth thing is a fly in the ointment.
Also at Mr. Smith's substack:
AI is the whiff of perfume that's supposed to mask the stench of terminal moral decay.
Hmmm...not looking good.
So...the drive for creativity recedes, stasis, then death.
Wait what? Entropy! I meant to co-opt the physically precise concept of
entropy to metaphorically describe the trend. Not death.
No, death bad, Sand Hill Road good.
