Life in the countryside has changed.
It used to be hard, rude, and isolated. Now, with a little bit of money, the Internet, and a combination of ancient and modern technology, it can be much more amusing…
We came out to Normandy on Saturday to help renovate an old farmhouse and spent much of the weekend cutting firewood.
|Rebuilding an old fireplace in Normandy|
Normandy can be wet, dark, and cold in the autumn. It helps to have an open fire — especially when you are working on a grim project.
Today, small, lightweight chainsaws make it easy to cut wood. You still have to split it and stack it up. But even that is made easier with a hydraulic splitter and the hydraulic bucket on the tractor, which lifts the wood to a comfortable height.
At the end of the day, tired but satisfied, you can sit in front of a warm fire with a little Calvados (a local, apple-based brandy) and enjoy the fruits of your labour.
The triumph of capital
Last week, Wall Street needed no open fires to cheer it up.
People who own stocks were a tiny bit richer (on paper, at least) at the end of the week than they were when it began.
But over the past seven years, stockholders have gotten a lot richer.
The Dow went from a low of 6,547 points in 2009 to just over 17,215 points, as of Friday’s close. This represents an increase in the wealth for shareholders of about $11 trillion.
Over that time, US GDP — the total dollar value of all goods and services produced in the country — has gone from about $15 trillion to $18 trillion.
The Dow has gone up nearly four times faster than the output of the US economy.
How could that be? Stockholders are a lot richer. But where does all that new wealth come from?
Rising economic output (GDP) should signal rising wealth for everybody — both labour and capital. But studies show that almost all the increase in wealth since 2007 has gone to capital (to owners and managers), and none to labour.
That’s why so many commentators and politicians are whining about ‘inequality’ and the need to ‘do something’ to help ‘America’s hardworking middle-class families.’
What bothers us is not that people didn’t share the new wealth more fairly but that there wasn’t really any new wealth to share in the first place.
In the absence of a big increase in economic output, those few who have gotten richer (by way of rising asset prices) did not do so by taking a bigger share of the new wealth. They took a bigger share of the old wealth.
Larceny, in other words.
They now have a larger claim on existing US wealth — resources, labour, and output.
If they sold their stocks and used the proceeds to buy tangible assets — land, houses, cars, etc. — they would come out way ahead. They would have more; others would have less.
Of course, it’s not that easy. Because they don’t have real wealth. They only have wealth on paper. Their new wealth is usable, but it is fleeting.
They can exchange it for other goods and services. But they mustn’t wait too long. Any individual investor can sell his shares and convert the money to other forms of wealth.
But if they all tried to sell, who would they sell to? The market would collapse and all the fantasy wealth would disappear in a matter of hours.
That’s why it often pays to get out early!
Winners and losers
In the meantime, some win and some lose.
The winners are shrewd. They work in finance. They own stocks. They manage money. They know the score.
But what about the others? What about the people from whom they take the money? (They must take it from someone, right?)
Who are these people? What do they think? What do they do? How do they live?
Here is a bit of information from our old friend James Davidson. His upcoming book, which he sent us for review, helps locate the losers:
‘A 2014 demographic analysis in the Washington Post… showed that in 210 counties of the U.S., income peaked over 45 years ago. In another 572 counties income peaked 35 years ago. In only 380 counties… did income peak in the decade of the 2010s.’
We don’t know where all these forlorn counties are, but some of them must be in Western Pennsylvania.
We visited the area south of Pittsburgh when we went to an aunt’s funeral a couple of years ago.
Donora, Charleroi, Monessen — they must have been once among the richest boroughs in the country.
People worked in the steel mills along the Monongahela River and earned union wages.
Then the steel mills grew cold and ‘financialisation’ heated up.
More to come…
For Markets and Money, Australia