‘All the lonely people,
‘Where do they all come from?
‘All the lonely people,
‘Where do they all belong?’
Move aside Eleanor Rigby, this chorus belongs to people on a quest for a deeper understanding of the economy and markets.
Those trying to find the answer to that gnawing question: Why doesn’t this feel right?
This is their song.
First, a big thank you to those who attended the Doomers’ Ball held in Melbourne on Tuesday night. You are the inspiration for today’s Markets & Money.
It was a pleasure to chat with people who think deeply about the threats and opportunities facing the global economy.
Many expressed a sense of relief at being able to talk openly about their concerns.
Most social circles, mine included, are not overly interested in questioning conventional thinking or challenging the orthodox. It’s too hard.
Life is busy enough without spending more of your precious time researching alternative points of view. Better to go with the flow and take the headlines at face value.
If you echo the sentiments of the crowd, you’ll fit right in.
You know the people I’m talking about. The ones who nod in agreement with the politically-correct tone of the day…irrespective of how stupid or banal it might be.
The ‘go along to get along’ majority.
The banner-wavers for all the popular causes.
It’s difficult for the person who harbours views that are at odds with mainstream. You see the world differently, and you cannot undo that.
No matter how hard you try to ignore it, you’re wired to look for the ulterior motives. Those who control the agenda are guilty until proven innocent. The more you look for their innocence, the greater the evidence of their guilt.
To quell your frustration and outrage over the lies and fake news, you resort to switching off the television. Watching it only confirms to you why TV deserves to be called the ‘idiot box’.
A barbeque with friends causes mild panic. You know that when the conversation turns to the latest episode of ‘The Biggest Loser’, you’ve got nothing to offer.
In an attempt to inject some intelligent wit into the conversation, you say something like, ‘You know who the biggest loser is going to be when China’s US$4 trillion of wealth management products implode?’
Big mistake. The only ‘wit’ they see is one starting with the letter ‘F’.
Your significant other delivers a perfectly-weighted kick to the shins followed by that stare…you know the one that says ‘Can you please just shut up and let people enjoy themselves.’
To the outsider looking in, you’re somewhere between a borderline conspiracy theorist and a raving nutter. You know they’re thinking ‘Here they come again, the doom and gloomers’.
You make a mental note to self: Better to keep your mouth shut than to open it and confirm their suspicions.
If you write a book and call it The End of Australia, you definitely do not share this with your social circle. Rolled eyes and stifled laughter are sure to follow.
You occasionally ask yourself: ‘Why do they think this?’ My intentions are pure. The only agenda — unlike those charlatans in power — is to save them from self-harm.
At some point you surrender to the inevitability that people are happy to be lemmings.
Happy right up to the point it goes pear-shaped. Then the ‘box’ is crammed full of idiotic ‘woe is me’ stories.
The crowd then changes tune and takes up the popular chant of the day.
The ‘I take no responsibility for my actions’ mob demands the government do something. Shoot a banker. Hang a broker. Anything that makes their world whole again…preferably before the next season of ‘The Biggest Loser’ starts.
Being the voice of reason in an unreasonable world is a thankless task. Best to recognise this early and retreat into your own world. Keep your own counsel.
This is the lot of the lonely people.
Where do we belong?
Well, a good number of us were in the ballroom of the Windsor Hotel on Tuesday night.
Fellow travellers on the lonely path talked openly about their concerns of what lies ahead.
The ‘guilty until proven innocent’ agenda-setters tell us it’s going to be relatively smooth, with the occasional undulation.
Growth will continue at a steady pace. Wages will rise modestly. Share markets are fairly valued. Property prices are taking a breather before going higher. Employment is strong.
All in all, the economy is on sound footing. There are plenty more recession-free years ahead.
At the Doomers’ Ball we talked about the different world we occupy
In this alternative space, the lonely traveller sees that the world has gone US$60 trillion deeper into debt since 2008. And they think… ‘Wasn’t 2008 a debt crisis? Surely adding more debt makes us weaker, not stronger?’
But the (doctored and completely fabricated) evidence to date is that central banks have performed a miracle…they have cured obesity with more fat. Perhaps a Nobel Prize in medical miracles is in order.
We notice the charlatans favourite word is ‘growth’. Every second sentence is peppered with ‘this growth or that growth’. Rather than simply accept this at face value, we Doomers looked at where ‘growth’ may come from.
When you cut through all the economic voodoo, the plain and simple fact is that economic growth can only come from two sources: increased workforce and/or increased productivity. The 20th century provided both of these components…in spades.
Global population has increased fourfold over the past 100 years.
The foundations laid by the Industrial Revolution delivered huge productivity dividends in the 20th century.
But where to from here for population and productivity?
The UN data on population growth predicts the global population will increase from today’s 7.5 billion to around 11 billion in 2100.
The majority of that population growth is predicted to come from Africa.
Like it or not, Africa does not rate as an economic entity. And even if you manage to herd ‘Africa’s despot cats’ into a formidable economic force, it’ll take a generation or two for the benefits to flow.
Take Africa out of the population equation and the UN data indicates the developed and developing worlds have reached ‘peak population’. At best, we’ll flatline from here.
A closer look at the ‘peak population’ data shows the 15–64 age group (the workforce) is on the cusp of a decades-long decline. Lower birth rates and ageing boomers sticking around much longer is turning society’s traditional pyramid upside down.
Increased workforce? Doesn’t look like it.
And those in the workforce can’t afford to rest on their laurels.
Automation (robotics and artificial intelligence) is threatening to cannibalise the jobs market.
To quote from the January 2017 edition of the Smithsonian Magazine:
‘Is a robot coming for your job?
‘The odds are high, according to recent economic analyses. Indeed, fully 47 percent of all U.S. jobs will be automated “in a decade or two,” as the tech-employment scholars Carl Frey and Michael Osborne have predicted.’
US jobs aren’t the only ones on the automation chopping block. It’ll be worldwide.
Which means those countries to our north supplying low-cost labour are going to become even more competitive. None of this adds up to wages ‘growth’ in the Western world…unless of course you’re one of the privileged agenda-setters.
The productivity gains delivered by technology are most likely going to be offset by the negative forces impacting the workforce. The best we can hope for is a zero-sum game. Stagnation is not growth.
The shameful legacy from the populous and productive 20th century is too much debt, too many entitlements, too much expectation on the world owing you a living, and too little responsibility.
How liberating it was to say that out loud. Not having to look around and see whether the thought-police were within earshot.
As a wise man once said, ‘If something cannot continue, then it won’t.’
The lonely traveller knows the baggage from the 20th century is too great a load to carry into the future. They accept this and have taken the necessary precautions to protect their capital.
The one question that remained unanswered was: When?
Which snowflake causes the avalanche? Which Big Mac brings on the heart attack? Which indebted sector or sovereign nation blinks first?
No one knows when the markets will decide enough is enough…perhaps next month, next year, or in a few years’ time.
From experience, the longer the illusion of prosperity continues, the lonelier life becomes for those who see the world differently.
As more people decide ‘it’s different this time,’ the greater your resolve must be…because you know it never is.
Where do all the lonely people belong?
With their money in the bank…that’s where.
Thanks again Doomers, it was a great night.
For Markets & Money