
Maybe This Global Slowdown Is Different - whocansay
http://www.bloombergview.com/articles/2015-08-31/maybe-this-global-slowdown-is-different/
======
ThomPete
What are seeing isn't a shift to the service economy but a shift to the
automation and digitalization economy. In other words and to paraphrase – It's
the technology stupid!

Look at any sector and you will see that the only way to further improve
production-output is to add more technology or artificial enhancements, which
means slowly; less and less; jobs for everyone.

Now if the price on all products and services went down at the same time as
the number of jobs are disappearing and the wages goes down, we wouldn't have
any issues.

But the problem is that urbanization pushes prices up and so even though
production gets cheaper and cheaper, the cost of living still seems to be
going up which means we will need to digitalize even more to make up for it.
But that takes time and in the meantime millions and millions of people in the
west are loosing any ability to participate in the job-market because they
aren't just competing against each other or outsourcing but everyone is
competing against automation and digitalization.

This global slowdown is different because the shift to the service economy in
China means that production have no other way to go than automation which
means you won't have the benefits of humans getting jobs and therefore become
part of the global economy.

Instead wealth goes to those who own the robots and Marx although wrong in
most things, was finally right about something :)

~~~
cylinder
I agree with you, I think the deflationary effects of technology are vastly
underestimated. Have a look around at what technology is doing day-to-day to
consumption and costs and it should be obvious, and yet talking heads still
expect CPI inflation.

We just got a nice patch because of China's malinvestment stimulus but now
they are forced to rebalance regardless of Xi. The commodity supercycle is
over and that's bad news for many countries (not really the US).

~~~
ThomPete
Exactly.

What happened was that globalization moved the jobs somewhere else, it didn't
create more in the west. In fact each decade less and less jobs have been
created. The fact is that there is no new industry for people to flee into and
if people think there is they have to explain what that would be.

[https://plot.ly/~BethS/8/job-growth-by-decade-in-the-
united-...](https://plot.ly/~BethS/8/job-growth-by-decade-in-the-united-
states/)

As long as economist keep talking about technology as an externality, they
have no business talking about where the economy is headed. IMO.

------
WDCDev
The best evidence I have seen for falling Chinese demand for natural resources
is over-capacity, and not some tranistion to a services based economy.

[http://www.cnbc.com/2015/05/07/more-pain-ahead-for-china-
ste...](http://www.cnbc.com/2015/05/07/more-pain-ahead-for-china-steel.html)

I think we are reaching a stasis point in the global economy. Aging
populations across Europe, Japan and the US are driving demand lower.
Developing economies could pick up the slack, and China has been trying to get
their population to save less and spend more, but the results haven't been
that great so far.

~~~
poutine
China is aging as well, their percentage of working adults peaked recently and
is now declining.

Interestingly while Europe has this problem as well, the US does not thanks in
a large part due to immigration.

~~~
Daishiman
The issue is that the immigrants are also having less children, and the
countries where they're from are also drastically reducing their birth rates.

Honestly, as an environmentalist it's not a bad thing at all, since the peak
in resource consumtion will come about either because of a voluntary
population reduction, or catastrophic mismanagement of growth.

However, we probably have never had a similar situation in human history, and
I don't know how our economies will adapt.

------
jhulla
Central banks [Federal Reserve/European Central Bank/Bank of Japan/People's
Bank of China/Swiss National Bank] are responsible for global capital
misallocation.

Due to immense and unrelenting political pressure, central banks the world
over have mispriced capital at gargantuan scales. This has led to immense
distortions in capital markets.

The level of central bank intervention has only grown in the past 30 years. So
the resulting economic growth or slowdown is measurably different than before.

Anecdotally, look at the following to see one example of capital distortion in
action:

The Swiss National Bank digitally printed an enormous amount of Swiss Francs
and bought Euros in order to peg their currency lower (didn't work). They used
this excess of _digitally printed_ capital to buy real capital assets such as
global equities.

A question to ponder: what is the fair market price of global equities when
some buyers can print money? Does it matter?

[http://www.bloomberg.com/news/articles/2015-05-06/snb-
boosts...](http://www.bloomberg.com/news/articles/2015-05-06/snb-boosts-stake-
in-apple-exxon-in-37-5-billion-u-s-portfolio) "The SNB stands out among major
central banks for its equity investments. It had 522 billion francs ($572
billion) of foreign exchange reserves at the end of March, acquired due to
interventions to defend the currency cap of 1.20 per euro it had in place from
2011 to early 2015."

Swiss National Bank's Portfolio 6/30/2015:
[http://www.nasdaq.com/quotes/institutional-
portfolio/swiss-n...](http://www.nasdaq.com/quotes/institutional-
portfolio/swiss-national-bank-913041)

~~~
forgetsusername
> _They used this excess of digitally printed capital to buy real capital
> assets such as global equities._

Equities aren't real capital, in the economic sense, either. Real capital is
land, plants and equipment; equities are financial capital.

> _" the Swiss National Bank digitally printed an enormous amount of Swiss
> Francs and bought Euros in order to peg their currency lower (didn't work)_

What do you mean it didn't work? They maintained the peg for _years_. One of
the reasons they _unpegged_ the currency was that the Euro was depreciating,
thus maintaining the peg was causing the SNB to depreciate against other
currencies, like the USD.

> _what is the fair market price of global equities when some buyers can print
> money? Does it matter?_

There's no mystery. Fair market price is the agreed upon price in a
transaction. If you think that for some reason all prices are distorted due to
central bank printing, then account for that distortion in determining what
price you're willing to accept or bid.

~~~
jhulla
Equities represent shares in real assets: factories, patents, etc. A pedantic
discussion of where accountants draw the line on the definition of capital
does not change the point: central banks have printed trillions and
participate in capital markets.

The SNB experienced a massive capital loss when abandoned their peg from 2011
in early 2015. They entered and exited their positions due to politics and
global capital distortions.

[http://www.bloomberg.com/news/articles/2015-07-31/snb-
posts-...](http://www.bloomberg.com/news/articles/2015-07-31/snb-posts-first-
half-loss-providing-critics-with-more-ammunition)

[http://www.economist.com/blogs/economist-
explains/2015/01/ec...](http://www.economist.com/blogs/economist-
explains/2015/01/economist-explains-13)

It is a tautology to suggest that a market price is by definition fair - after
all it was agreed by both buyer and seller. But markets themselves can be
unfair - in the most basic sense, by the participation of shills.

[https://en.wikipedia.org/wiki/Shill](https://en.wikipedia.org/wiki/Shill)

And in our current economic environment: the concept of too big to fail.
Politically, we've accepted an asymmetric reward structure for some market
participants. This results in market distortion and unfairness to others.

[https://en.wikipedia.org/wiki/Too_big_to_fail](https://en.wikipedia.org/wiki/Too_big_to_fail)

~~~
forgetsusername
> _The SNB experienced a massive capital loss when abandoned their peg from
> 2011 in early 2015_

First of all, I wouldn't call a 10% loss "massive". The market generally
suffers one of those events annually. Second, it was short lived. The USD/CHF
went from 1.01 to 0.86 after it was unpegged. It now sits at 0.97, 8 months
later (1.2, 0.98, 1.08 for the EUR/CHF, respectively). It was a non-event.

I mean, I'm still trying to figure out what point you're making. Are capital
market distortions new? Sure, the scale of intervention might be larger. But
the scale of _everything_ is larger today. And why do you assume that these
distortions are always bad? I don't. They have to be examined on their
individual merits. I like the government building roads and subsidizing
certain industries. Sometimes it's good business. Maybe buying stock in
certain domestic industries is as well.

Are shills new?

Is an asymetric reward structure new?

The basis of the argument against TBTF is moral hazard. Is that unique to the
banking system? I've seen it suggested on these very boards to incorporate
your company ASAP, in order to prevent personal financial liability. Well,
that just might promote higher risk-taking by the entrepreneur. Or what about
the house-flippers? Heads I cash in, tails I mail the keys to the bank. Are
these people too small to fail?

This is our system. I choose to study it as it is rather than compare it to
some non-existent ideal.

------
nevinera
Every recession in history has generated this same category of article - every
generation feels that their recession is special because "things have changed
now!"

Maybe this one is different - that's a possibility. But I wouldn't bet my
money on it.

~~~
mslot
Our economy has reached a point where it's becoming so harmful to the
environment it exploits that it's causing a mass extinction, an event that
hasn't occurred for 250 million years. On the timescale of a few decades,
things are becoming very, very different.

~~~
blisterpeanuts
Mass extinctions have occurred with much greater regularity than every 250
million years. The ice ages come in pulses, to use the geological term, and
both the warming and cooling trends have inflicted vast changes in the species
inhabiting the planet.

As far as CO2 emissions, the EPA's own statistics suggest a static-to-downward
trend since the early 2000s in the U.S.
([http://www.epa.gov/climatechange/ghgemissions/gases/co2.html](http://www.epa.gov/climatechange/ghgemissions/gases/co2.html)).
We're barely above where we were in 1990, despite an increase in population
from 250 million in 1990 to 319 million today. 3rd World economies will
eventually follow suit, as they adopt the cheap new green tech that we're
getting.

The trend today is toward more efficient vehicles, cheaper and more available
solar for houses, a massive switch in electric power plants from coal and oil
to inexpensive natural gas which emits less carbon.

Technology, Chinese mass production of green energy products like solar
panels, American fracking of natural gas, all will conspire to reduce the
carbon emissions. The trends are heartening.

------
blowski
This article, while interesting, is like reading a weather forecast that says
"there might be a big storm at the end of the week, but there might not". The
idea that the population can't keep on growing exponentially and using ever
more resources has been around since ancient Greece at least.

I'm sure that if we were able to look at long term economic stats for the last
2 millennia, there would be graphs that looked very similar to those in this
article.

Of course, one day the population and our use of resources has to stop
growing, but I doubt we'll see it coming 100 years in advance.

~~~
gph
>Of course, one day the population and our use of resources has to stop
growing, but I doubt we'll see it coming 100 years in advance.

I can't speak to resource usage, but I think you'll find population models
have the global population plateauing within the next 50-100 years. We aren't
talking about what's going to happen in 2000 years here, that no one can be
certain of. Your argument is like saying it's rained and stormed for 2000
years why even try to predict the weather for the rest of the week? I hope you
don't mind, but I think I'll still pay attention to the weather forecast even
if it isn't always 100% accurate.

------
joeyspn
Maybe the "patches" made in 2008 didn't actually fix anything and we're just
back to square one... maybe...

------
dovereconomics
I wouldn't be naive to try to point out reasons for such slowdown, but this
response is somewhat dangerous.

The rhetoric of 'WE NEED MORE DEMAND' has hurt many countries and is probably
one of the causes of this slowdown.

------
motters
I hope it's not another recession. We've not even recovered from the last one
yet.

------
oldpond
Banking master plan Step 1. Go global. Check. Step 2. Sell all the debt you
can. Check. Now what? One thing to consider is that the baby boomer
generations are all hitting 60. This large population group is entering the
period in their lives when they stop buying stuff. There's only one planet,
and once the banks have everyone in debt where's their business model? The
reason interest rates are effectively zero is because if they raise them the
entire world will declare bankruptcy. The banking system is screwed. Time for
a reset.

~~~
forgetsusername
> _Step 1. Go global. Check. Step 2. Sell all the debt you can. Check. Now
> what?_

You tell me. It sounds like you believe all of that "sold debt" is just
vaporized and results in nothing, instead of centuries of insane global
growth. Don't believe it? Look out your window.

~~~
oldpond
There is no "now what". That's the problem. There's only so much "good debt"
to buy and it's all bought. These systems depend on continuous growth to
function, and unless you can figure out how to sell mortgages to Martians, you
are fresh out of growth. Maybe I'm wrong, and maybe they'll figure out how to
have another bull run, but I think they've hit the wall.

~~~
forgetsusername
What times we live in, to be the generation that experiences the "end of
growth"!

Ill bet anything that you're wrong, though.

~~~
oldpond
Not the end of growth, but for the financial system, yes. Why does it always
have to be a bet? There's no mystery to the financial system.

------
monochromatic
That graph of population reaching a plateau is utter bullshit when you
consider we're only at 2015. Are they just guessing?

~~~
ThomPete
Not according to Hans Rosling.

[http://www.ted.com/talks/hans_rosling_shows_the_best_stats_y...](http://www.ted.com/talks/hans_rosling_shows_the_best_stats_you_ve_ever_seen?language=en)

~~~
wernerpm
and this talk is already 9 years old

