The Great Economic Shift Continues

Ever since the economic turmoil of 2008, I try to split my time between mainstream news and so called alternative news sites.  After all, it was the alternative news sites that called not just the property bubble and CDO’s behind the 2008 turmoil but the dot com bubble that peaked in 2000.  Given the way that the mainstream media depends on staying on the good side of its corporate and political paymasters, it makes sense that they would be the last to see anything coming.

In this light, it seems that not just alternative sites but increasingly, some mainstream news outlets are pointing to the unsustainability of the current American / British / Japanese system of quantitative easing which is essentially about running the currency printing presses to sustain aggregate demand.  But easy money is no substitute for genuine productivity gains and economic historians are pointing out that without exception, every civilization that has done this in the past has experienced a single outcome…collapse.

The naysayers point to the petrodollar system which helps entrench the US dollar as the world’s reserve currency and thus the real crutch holding up the US economy right now.  They then point to the moves by not just the BRIC nations, but US allies such as Australia to settle trade in non-dollar currencies, as a bad omen.  It’s just a matter of time they say.  After all, the Americans and Brits now sound like desperate third world nations – obsessing about transnational companies avoiding taxes and citizens hiding money off shore?

No doubt, this thinking has led many to withdraw from the equity markets and invest in precious metals and for some, bitcoins.  The Anglo-American alliance has sent two powerful messages in the last couple months.  In terms of the recent decline in gold prices, yes India and Cyprus are contributory factors but so is short selling by the Federal Reserve.  Sometime last year, US government officials said that bitcoin was not a currency, yet earlier this month Immigration and Customs Enforcement (ICE) froze the Dwolla (a US online payment system) of the world’s largest bitcoin exchange as they now consider bitcoin a currency which needs to follow regulations.  It seems to me that both these acts were a warning shot for those who are betting against the dollar.  The simple message is that those who bet against the dollar will not win.American Tax Singapore

Geopolitics aside, what the naysayers forget is a very simple idea – innovation.  I was in Seattle a couple months ago and I look forward to my next trip in July.  It’s inspiring to consider the economic boom there and further down in the Bay area.  The Seattle area is home to Microsoft, Amazon.com, Expedia, Nintendo, T-Mobile as well as engineering and operations for Google, Facebook, Intel, Hewlett Packard, Oracle, Yahoo!, and Adobe.  The state is also a leader in RFID technology and has one of the highest concentrations of technology expertise in the world.

A recent article in the Economist pointed out that when President Ronald Raegan made America’s military satellite-navigation system, the GPS, available to the world, entrepreneurs pounced on it.  Car-navigation, precision farming and about 3 million American jobs now depend on GPS technology.  I would not even try to quantify the number of jobs (including mine) that rely on the internet, a technological revolution that has its roots in the ARPANet, a US government project.

My point is that time and time again, technology has proven its ability to be an incredible game changer and for a number of reasons, the US continues to be a center for innovation, while despite its best efforts, Asia remains a center for replication.  Add to this the revolution driven by cheap natural gas (thanks to fracking technology) and then you would understand why I am yet to be convinced by those who speak of any imminent collapse and of this being China’s century.

At the same time, those on the fringe are right about us being in the midst of some sort of revolution.  I have previously written at length about worsening social inequality here in the UK, in the US and even in the Caribbean where I spent much of my life.  In the US and the UK, it may be that the substitution of technology for labor happens first with more routine tasks, which is a big part of the reason why less-educated workers have seen their wages fall the most as we moved deeper into the computer age.

I would assert that it is impossible to ignore that we do live in the age of the great decoupling.  The decoupling of productivity from employment.  The decoupling of wealth from work.  The key to it all is technology.  Technology is racing ahead and leaving more and more people behind.  The biggest question facing my generation is how do we address this decoupling and therefore wider issues of worsening social inequality?

Read more on DerrenJoseph.blogspot.com

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