The woman above is a former quant (math super geek) at investment banks Goldman Sachs, Lehman Brothers, and Bear Stearns. Nomi Prins now writes and speaks on the economy, and specifically how the central banks of the world have led us down a path that has completely reshaped the world economy in a dangerous way. Her latest book is Collusion: How Central Banks Rigged the World. Her work really helps explain where the global and major nation economies are headed, dictated by the actions of the world's central banks over the last 10-12 years.
Big trends in today's work and business world
There are a bunch of big issues happening in our world right now that I see having a major impact on every single person, at some level. I've looked into these, to the extent I've been able to, over the last few years. I don't think there is any way that at top down approach will even begin to address these issues in time. I've come to the conclusion that the best way to deal with the underlying issues happening in the world of money, business, and the economy, is to encourage tens of millions of Americans (and people in other countries) to create their own micro or small businesses. A "micro business" is generally defined as a one person business. Without large scale entrepreneurship, I see no other way to keep most of the adults in the world working in some functional way, in th efuture we're heading towards.
Here are the big issues I'm looking at that led to this conclusion, and why this blog, and many future works of mine, will work on this theme of encouraging people to create their own "jobs", by creating small local businesses, a few of which, inevitably, will turn into large businesses and create other jobs.
-The continual rise in new technologies- Like it or not, new technologies, of all kinds, are continuously being invented, some of which survive and get implemented into business and people's everyday lives. The tech genie will not go back in the bottle, we're going to have to deal with all these technologies as they enter our lives, and figure out how to adapt to them. Many of our biggest problems today stem from not doing that very well.
-The Big Transition- This is my name for the transition from an Industrial Age society to a knowledge-based, or Information Age society. Futurists Alvin and Heidi Toffler (2007 Alvin Toffler interview) pinned the beginning of this change at 1956, the year there were more white collar (office) workers in the U.S. than blue collar (factory/industrial) workers. I believe we're not IN the Information Age now, but rather in a really long transition period between the fading Industrial Age and the growing Information Age. During this period, every industry, every business model, and every institution of any kind will be disrupted, and either collapse, or be intentionally reformed, into an Information Age version of itself, if it's still viable at all. Non-viable institutions, whether businesses or other organizations, will simply fade away into obscurity. I guestimate the end of this transition as being around 2040.
-The loss of another 90-95 million jobs in the next 15-20 years- This often cited 2013 study, by Oxford University, in England, found that 47% of jobs (in 2013) could be completely lost to new technologies by the year 2030. In the U.S., that's roughly 92 MILLION jobs that will disappear between 2013 and 2034. That's in addition to the tens of millions of jobs lost when the masses of American factories closed down, from the 1960's to the early 2000's. These jobs were lost to both outsourcing and new technology, like industrial robots and computerization of so many industrial procedures.
Obviously, 47% of all jobs, or roughly 92 million jobs, is a HUGE number, and it's easy to argue that the report overstated things. OK, let's say the highly intelligent people at Oxford were off by 20% in their estimate, and only 73.5 millions jobs wind up disappearing. The number is still astronomical, and catastrophic to the American workforce. Whatever the final number ends up being, it will affect tens of millions of Americans, and hundreds of millions of other people, around the world.
-Disruption of industries and traditional business models- The new technologies of all kinds, like the growth of the internet and smart phones, in our everyday lives, for instance, have completely changed how people communicate. This has changed who people communicate to, how fast they can communicate, what types of communication they can use (text, voice, photos, video) and what portion of the world an average person can communicate with. These changes in communication abilities, along with so many other changes, have changed how business can, and does, operate, which led to entirely new business models. As younger people, armed with new technologies, experiment and explore, some create new business models that disrupt, and completely change entire industries very quickly.
There was a time when we listened to FM radio, and then went to a record store and paid $15 or $20 for a band's album of ten songs, on vinyl, CD, or cassette. Those days are gone, disrupted by Napster, then the iPod and other MP3 technologies, and other things since, like steaming. This type and scale of disruption will happen in every industry, in my opinion, and perhaps several times in some industries. Yet even today, in 2019, most small businesses barely use the new technologies and platforms to anywhere near their full potential. Even major corporations struggle with the world where nearly every consumer has a voice, a video camera, and a way to engage much of the world, share their opinion, and buy merchandise from their phone or laptop.
-The Fed and other central banks working to keep interest rates artificially low and to continue quantitative easing policies- This is the point that former investment banker, Nomi Prins, is making in the video above. The Federal Reserve, the U.S. central bank, and other central banks, lowered interest rates to help businesses keep access to credit, during and after, the 2008 economic crash. Some countries actually have or had negative interest rates, meaning banks and businesses got paid to borrow money, in essence. Central banks also implemented "quantitative easing," which basically means they either used taxpayer money, or created money out of thin air, then bought their country's government bonds with it. In some cases they even bought stocks of certain corporations.
Imagine you cold write a a magic check, that didn't have a bank account balance backing it up. You could just write a check for a million dollars, deposit that check in your bank, and have a million dollars in your account. Then you could take that million dollars, and buy products from your own business. Your business would soar, right? That's an oversimplified way of explaining the $21 TRILLION (a trillion is 1,000 billion, just to remind you) in debt that central banks have pumped into the financial system in the last ten years, and how they did it. The Federal Reserve used this money to buy U.S. government bonds, and other central banks bought bonds from their own country. That's what quantitative easing is, buying your country's loans (debt) to add money to the financial system.
The ultra low interest rates and quantitative easing have added incredible amounts of debt to the system, 21 TRILLION dollars, which helped keep the world's financial system afloat, after the 2007-2009 crash/Great Recession. These programs were supposed to be temporary measures. But the central bankers didn't know how to stop these measures without creating another crash. So the central banks just kept these plans going, kind of like keeping Grandpa on oxygen in the hospital after a heart attack, a stroke, and kidney failure. He's on life support, but there's not much hope if you take him off. That's basically been the state of the world economy for the last decade. If you take the oxygen away, Grandpa's going to have a hard time breathing, and will probably die.
If interest rates go up, even just to "normal" levels, then the countries and businesses who've racked up so much debt have to make higher payments. A lot of them are borrowing money just to stay in business right now, and can't afford higher payments. So the next crash will be like 2008 in many ways, but with much, MUCH more debt, more debt than ever in human history, that can come crashing down. Yeah, that's gonna suck.
-The college system and the student debt crisis- The main trigger that led to the 2008 crash was $1.3 trillion in "sub prime" mortgage debt. Basically, millions of people who didn't have great credit, and who couldn't really afford homes, were allowed to get mortgages to buy homes from about 1997-2007. This happened because Wall Street financiers found a way to buy those mortgages, and repackage them into other investments called CDO's, and make a ton of fees selling those other investments to institutional investors, like cities, states, and retirement funds.
Over the last ten years, student loan debt has been bought, repackaged, and resold in a nearly identical way to the sub prime mortgages. The repackaged student loan investments are called SLABS, Student Loan Asset Backed Securities. Now, if every student pays back their loans on time, these are solid investments. But in this article, for example, we read that a million students default on their loans every year, and 40% of all students could default on their student loans by 2023. If a significant number of students default, then the SLABS lose value, and could be devalued, or straight out collapse, like sub prime mortgages did in 2008.
If that happens, which seems VERY likely, then colleges across the country lose a significant amount of their income. Colleges and universities are now the main employers in many small and mid-sized cities. So if the income of colleges goes down dramatically, then the economy of most college towns will go down significantly. Here's the bad news, most of the 150-200 good sized cities in the U.S. are college towns, where colleges and universities are the top, or one of the top employers. So that's not good.
-The Rise of the Creative Class and Tech clustering, as described by Richard Florida- What started as research to figure out why top tech students were leaving Pittsburgh after graduating from Carnegie Mellon University, turned into Professor Richard Florida's life's work, including discovering a new category of workers, the Creative Class. He found that about 1/3 of today's workers make their living using some form of creativity, problem solving, and decision making. These are the tech workers of the world, but also artists, teachers, media workers, scientists, engineers, doctors and others. One big finding of Florida's research showed that Creative Class people tend to find the place they want to live, and then look for work. They cluster in certain areas which already have other creative scenes, like places known for good art and music scenes. Very simply, highly creative people like to live around other creative people. The tech companies, unlike previous Industrial Age companies, go to where the talented people are, they don't just go to the city that gives them the biggest tax incentives.
So now we have much of the high technology industry, mostly clustered in about ten metro areas: The San Francisco Bay area, Boston, Seattle, New York City, Los Angeles, Washington D.C., Austin, the Raleigh Research Triangle, and a handful of smaller tech hubs. This means that most of the United States., DOES NOT have a strong tech industry presence in its communities. Those are many of the same areas that lost most of their high paying manufacturing jobs as factories moved overseas, or lost human jobs to industrial robots and new technology. So we have 10 or 12 metro areas surging economically, and most of the rest struggling to create enough high paying jobs for their population.
-The "Geographic Recession" caused by tech clustering- The tech company clustering, just explained above, led to huge areas of the country that never fully came back from the loss of manufacturing jobs, and never came back from the Great Recession of 2007-2009. For much of the U.S., particularly rural, small town, and small city America, it feels like the Great Recession is permanent. So we have tech hubs where 30%-40% of the people are doing really well, but the other 60%, largely service workers, struggle to afford rising rent, home buying, and other costs. Those centers are where much of the population is concentrated.
Then we have most of the country, by area, where a much smaller percentage of people are living really well, and 65%-85% of the people are struggling to survive, working one, two, or three low wage or gig jobs. The housing prices are much more affordable in those areas, other costs are often lower as well, but there aren't near enough high paying jobs for the majority of people to live well.
-Political Polarization in the U.S.- The current political polarization in the U.S. has deep roots in this economic divide, though there are other major factors as well. The tech hub cities, mostly urban and more socially liberal, tend to vote highly Democrat, and the rural areas, which for 40 years have become much more socially conservative, tend to vote largely Republican. The inability to make a good living both from older former factory workers, and for younger workers now saddled with huge student loan debt, has led to a huge populist movement here in the U.S. (and Europe as well). Here's the crazy thing, younger, college educated workers struggling with student debt tend to favor the far Left politically, gathering behind Bernie Sanders and Elizabeth Warren and other Progressives and Social Democrats. Meanwhile, older former factory workers, and rural, mostly White people, also struggling to make a decent living today, have been drawn to the far Right, gathering behind Donald Trump.
The crazy thing is, most of the people drawn to the populist movement, both political Left and Right, are becoming polarized for the same reason, they are having trouble making a good living in today's fast changing world. But for ideological reasons, often just because of where they grew up, they have become polarized to opposite sides of the political spectrum, which has shattered both the Republican and the Democrat parties. The traditional power players in those parties are struggling to maintain power, as new candidates farther from the center, keep gaining ground. This draws the politicians farther apart, so they have become tribal, and often refuse to compromise at all.
So we have tens of millions of average Americans pissed off for the same reason, because they can't make a good living these days. But because they've been attracted to opposite sides of the political world, the people they vote for can't get much, if anything, done. So at a time when we need a ton of "roll up the sleeves hard work" in Washington, and state capitals, to make lots of hard compromises that are in the best interest of almost everyone, just the opposite is happening. This is why I have no faith in serious top down programs happening to deal with all the issues I'm listing here. The poltical polarization will continue to just make all these issues worse, mostly by ignoring them or not acting at all.
-The Next Great Recession... coming soon to a business near you- Oh, and if the geographic recession crippling most of small town America, and the insurmountable student debt crippling metro/tech hub America, isn't enough, all these things are setting the stage for one hell of a Next Great Recession. On average, we have a recession every 4 to 10 years. We're at the end of year 10 since the last recession officially ended, at the moment. As I explained above, the ultra low interest rates set by The Federal Reserve and other central bankers, have had our economy on "life support" for ten years. Current Fed Chairman Powell, did exactly what he was supposed to do, and really slowly began to raise interest rates back towards a more reasonable level in 2017-2018. This gave The Fed a little room to act when another recession begins. He also reduced the number of U.S. bonds owned by The Fed, bought in the quantitative easing program.
The stock markets freaked out as rates were raised, because low interest money is like crack to Wall Street, and they're seriously addicted. As I predicted months before, the Dow Jones 30 (Industrial Average), and the broader stock indexes, began to drop a few weeks after President Trump signed the huge tax cuts in December of 2017. Since then, nearly every form of manipulation possible has been thrown at the economy to keep it from crashing. Most recently, hints of lowering interest rates and more quantitative easing have given. This appears to be a desperate attempt to keep the stock markets (the visible "economy") up, giving the illusion that everything's going well financially. The Republicans, of course, want the economy to appear to be strong until the 2020 presidential elections, because that tilts things in their favor politically.
The markets keep trying to begin their normal, and much needed, correction, and then are pushed and propped back up. But they only go to right around the previous highs, now approaching Dow 27,000. The fact that they keep stalling at nearly the same levels shows that there's no underlying reasons for the markets to surge significantly higher. If there was real momentum, real growth, we'd be at Dow 30,000, or more, right now. Look at the charts for the last 5 years, four times at the high levels in the last two years, for the DIJA 30, the S&P 500, and the Russell 2000 (one peak's a bit higher than the other 3 on the Russell). The Nasdaq 100 has been around the same highs three times. The fact that the markets hit such a dramatic wall of resistance, so many times, over two years, shows there's not much upside left to be had.
If the Fed actually lowers interest rates, that will definitely help the stock market, temporarily. But lowering interest rates is also a signal The Fed thinks we're either in a recession, or weeks or months from entering a new one, as you can see looking at when interest rates were dropped on this chart when you look at 1990, 2001, and 2008.
-The Retail Apocalypse- One recent article spoke of more than 20,000 retail store closings, when you add stores closed in 2017, 2018, and planned closures in 2019. Another 15,000 to 20,000, or more, retail stores closed from about 2008 to 2014. This article from May 2019 claims that another 12,000 individual stores may close this year alone (2019), and up to 75,000 MORE STORES may close by 2026. Remember "the economy is doing great," and pay no attention to the man behind the curtain. That's what we're told by politicians and much of the business news media, day after day. It's the business news media's job to keep people excited about being in the stock markets, but it's a hard job these days.
What the hell is going on? Here's what's going on. The "Retail Apocalypse" is the technology enabled Disruption of the Industrial Age, consumer goods, sales and distribution system. Large numbers of good sized stores, spread across the nation in malls and shopping centers, worked well through the 20th century. But millions of people would rather order many things on their phones or computers now, and have them delivered.
Far fewer people want to take the family to the mall these days. Because of this, 400 of the 1100+ American malls, are expected to close by about 2023. Some have closed, and many more are on the Dead Mall list. Those are the malls with 70% or fewer stores still open in them. There's even the DeadMalls.com website chronicling the demise of U.S. malls in real time. What's happening is that the Industrial Age retail stores system, which was great for 100 years, is breaking down, and being replaced by online sales, big box stores, and discount retailers. That's Disruption in action. The stores that are closing down are/were run by people who didn't take changing technology seriously, or simply didn't bother to adapt to it in time, if at all.
It's common to hear people blam Amazon for all of this. It's not Amazon's fault, as so many people claim. Jeff Bezos, Amazon's founder, was just one of the few who saw the incredible potential of the internet to sell stuff, and then worked his ass off to build a new way of selling and distributing merchandise. It's not just Amazon. Ebay allows hundreds of thousands of smaller sellers to do the same. So does the Amazon's resellers program, along with Etsy, Shopify, and other online sales platforms. You can bitch about Amazon, which turned 25 years old yesterday, by the way. But Sears (& Roebucks) disrupted the small town general stores with mail order in the same way, 140 or so years ago. It just took them 50 years to complete the process, because things moved much slower then.
Why am I not mentioning global warming and climate change?- Global warming, climate change, and changing weather patterns are huge issues, no doubt about it. These issues affect some people directly now, and will affect millions more people 20-30-40 years from now. But the economic issues I'm writing about here are affecting most people right now. These issues will affect every single person in the U.S., and most of the world, in the next 2 or 3 years. These economic issues will affect far more people, far more deeply, far sooner, than climate change. These economic issues, which are basically being ignored by nearly everyone, could possible take down civilization as we know it. There's that much crazy shit happening, and coming down the pike soon.
Climate change is only an issue, if we're around to deal with it. These economic issues are a much bigger deal, that will hit far more people, far sooner. That's why these have my attention now.
And now for the good news...
"Recessions are when the whole world goes on sale, but almost nobody wants to buy."
-Steve Emig (me)
If you're one of the people who actually read this big article (congratulations! And thank you), you now have a bird's eye view of why so many things seem so crazy these days, in the job market, business, and the economic world. These things are all tied together. Most people don't want to think or learn about "the economy," yet the bitch about not having enough money every day. Money connects and affects every single one of us, unless maybe you live in a cabin in the Yukon Territory where you fish, hunt, and trade goods with Sasquatch. I'm guessing not many of you fall into that category.
You now have an idea where things are headed. You have the internet, Google, and You Tube, you can verify the facts I've shared, and contemplate my original ideas. You can learn, from free online how-to articles and videos, how these new technologies work, and how to apply them to your work and life. Most importantly, you can look at the future or your own industry, your own job, or that business you've been thinking of starting, and see what makes sense for you to do going forward.
-The internet and other platforms that can help almost anyone build a small business- Nearly every individual in the U.S. can access the internet, and can learn, communicate, share, trade, and sell, with millions of other people now. Using online platforms and phone apps, you can make money in thousands of ways that weren't available a generation ago. But you have to come to grips with the fact that all of this is actually happening, whether you like it or not. That ability to simply acknowledge what's happening, is one of the biggest obstacles society faces. Millions of people simply refuse to believe facts and reality these days. The future will be a huge punch to the gut, (and everywhere else) to these people, and they will really, really struggle with it all.
I get it. Hey, I liked shooting BMX videos on a Hi-8 camera, editing with the actual tapes, and making VHS copies of my video to sell, in 1990. But those days are over. I got walloped by Disruption in the taxi industry in 2003, and struggled with it until late 2007. I wound up homeless. I was a diehard Luddite, I didn't want to deal with "that internet/cyber stuff." And I paid a huge price for that.
I changed my mind after I started blogging for fun in 2008, and began the long process of figuring out what it takes to be a writer (and now artist as well) in today's high tech, hyper-connected world. I learned bit by bit, very slowly. You don't go to college for this stuff, you learn online, with self-directed education. You do this in addition to college, if you want to be an employee. You learn this instead of college, if you want to start your own business. That's your choice, each person has a different path and dreams in life.
I'm still struggling, and homeless once again, for the moment. But I've sold thousands of dollars worth of art, and some written work, online in the last three years. I'm getting to the level of making a decent living, bit by bit. This blog is to share ideas and help other people who are, or want to, do the same thing, in your own way.
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