I wrote to you before about various issues on video games, but I have a deeper concern now. I wanted to get your take on the devaluing of our dollar and the talk of global governance. You mentioned in your article The End of the Schumpeter Prophecy how the 2010 elections would spell the end of the Schumpeter line of thought that Capitalism would end and how unemployment would be a boon to the incumbent politicians. Have you heard anything about global governance and the purposeful devaluation of the dollar (leading to unbelievable price hikes for food)? Is the global governance talk coming from powerful individuals that know their days are numbered due to the coming Great Disruption as spoken of by Scott Anthony? I feel and know we in the U. S. are ready to innovate again, we just need stability in the economy and minimal interference from government. What’s your take on the current business/economic/political situation currently? I get information from various sources and your outlook seems to be among the more positive ones I’ve come across. Thank you for your time and keep up the great work on your sites.
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I’ve rewritten my response to this email several times. The original reply was at ten pages and still going before I stopped it. I could write a book on this subject and might as well.
It is a mistake to look at the United States as a singular economic unit. Currently, while there are places in the United States that are facing decay (California, Michigan) there are other places that are in full bloom (such as Texas, Florida). In fact, all of United States history can be chronicled as some parts of the nation in decline and others in growth. It is a highly mobile country, perhaps the most mobile on Earth. It is common for people to move all across the country just to get a better job. And this has been the practice for centuries. And despite there not being any frontier space to carve out, it is like a game of musical chairs but with various states and regions.
In earlier drafts to this response, I would go into detail in various places. But this always led away from the general subject at hand. Watch the redistricting and keep a sharp eye on which states are growing and which states are not. This will be a major clue on the shift of power in industry within America. People vote with their feet and population migration will tell you the future before economists ‘discover’ it decades later.
You ask questions like these:
Have you heard anything about global governance and the purposeful devaluation of the dollar (leading to unbelievable price hikes for food)? Is the global governance talk coming from powerful individuals that know their days are numbered due to the coming Great Disruption as spoken of by Scott Anthony?
Coming? It is already here and all about you!
No side is reacting specifically to the Great Disruption. They are reacting to its symptoms which they don’t really understand.
Let me give you an example: unionization. Unions are an artifact of the Industrial Revolution. There is no need for unions anymore especially with how people come and go to different jobs so often. Unions used to be a pillar of political power for politicians to exploit. Since the Industrial Era is on the wane, it is no surprise that unions are on the wane as well. If unions are on the wane, that means certain political machines become much weaker. And you know they cannot allow that.
One of the responses has been to massively grow unions. But these aren’t unions in businesses but unions among state employees (e.g. teacher unions). A major reason why states like California are facing financial devastation is because of unions. Imagine these employees retiring at age 45 with a nice boat. The main reason the Detroit car companies declined was because unions were eating them alive. The CEO of General Motors thought, when he signed on for the job, that he was going to deal with making cars. Instead, much of his work was dealing with things like health care due to the hefty union retirement packages consuming around 50% of General Motors’ revenue. In state unions, their revenue comes from the state’s public treasury. So the more these state unions grow, the more the general business in that state declines. What is destroying Hollywood? Unions.
I see actions like this insane state union expansion and things like nationalizing car companies as a defensive move in response to the shifting tectonic economic plates. The moves to inflate the currency I also see as a defensive move by these politicians because an inflated currency is easier to pay off debt. The reason why they are defensive is because age old political machines are slowly dying.
The sources you hear probably perceive these actions to be offensive moves. Such people would perceive the crazy politicians to be actually assaulting the country. But from their perspective, they are ‘saving it’ which translates from political-speak as to ‘saving my power pillars’. Back during a prior Great Disruption, the feudalistic South behaved in a defensive way (e.g. succession) to save their political pillars that were being threatened by the Industrial Revolution (causing the North to grow much faster than the South and, thus, having more and more electoral votes which is why Lincoln’s election, without a single southern state, triggered the dominoes to fall).
A major factor for optimism is how financial education is improving across all levels. Politicians are not stupid. They don’t spend trillions just because they do not understand economics. They do understand it but you being rich does not translate to them gaining in political power or wealth. To the contrary, the wealthier the people the more independent they become. Politicians do not like an educated populace. When Senator Spector, that longterm crusted politician who was in office for decades (and was made gone by losing in primaries), was at a town hall, he said, “I’ve never seen people so informed.” This wasn’t a compliment. It was a complaint.
Why are more people informed today than they used to be? For one thing, more and more people are realizing they have to learn how to retire and invest on their own. The era of working for one company, getting sweet retirement package, is a thing of the past. But more important, media is no longer newspapers, three television networks and some radio channels. There is the Internet. There are new industries of information springing up. Newspapers and traditional TV news are going the way of the dodo. And good riddance.
You ask when will America will be innovating again? The answer is that it already is. It is innovating in places people never suspect. If you went back in time over a hundred years ago and said that Detroit would be an industrial center of the nation, people would laugh at you. Why? Detroit was a haven for smugglers before it became an industrial beacon.
If a DeLorean appeared from fire before your very eyes and a Marty McFly came out to say he was from the year 2085, you would likely have many questions for him. But he would say things that would shock you. You might ask, “Where is the center of industry in the United States in 2085?” He might say, “Why, Alabama of course!” And you would shriek, “Alabama!? How is that possible!? In this crazy future, where is the center of art and culture? Georgia!?” The Marty McFly would blink at you and nonchalantly say, “No, Texas.” And you would be even more bewildered. Silicon Valley is, to us, a center of the computer industry. But from the 2085 Marty McFly’s perspective, Silicon Valley could be devastation. Just as Detroit, today, means devastation and decline, fifty years ago Detroit was the apex of industry.
No one is going to tell you where and how the future of innovation will happen. Those who know will never tell you… for free. Investors and businessmen pay a good amount of money for such information. If you knew what the future was, if you knew what 2085 Marty McFly knew, you could easily make yourself rich just by putting yourself in front of certain unknown trends.
Try to take a big picture perspective of what is going on. This isn’t the first Great Disruption to happen. And politicians acting crazy or messing with the money is not new. Actually, you live in a pretty good time. If you lived during a Civil War or during a World War, that might be reason to get pessimistic. There are now young people who do not even know of the Cold War (which makes me feel really old). It is good for the world to change. But you live in nice times.
Again, the biggest change is how people are becoming increasingly informed. Much of this is due to things like the Internet. Imagine how ignorant we were when our primary sources of information was the local newspaper and the three network television channels. Oh man, look back that had to have been the Dark Ages. But newspapers are on their deathbed and the three network channels will be joining them soon. Now, people have many more options in how to get information.
There is only one major danger to this Brave New World. The danger is if people do not begin to bend their thoughts toward financial education. If you do not do this, expect a life of pain and slow misery as you will be unable to retire, unable to be financially free, and be forever leveraged by a job you may or may not like. If you do bend your thoughts toward financial education, you will become more confident about your financial future, be able to retire wealthier (hell, be able to retire at all!), and be able to shape your economic destiny.
Let’s use Marty McFly again for a moment. He goes back centuries ago in time to try to teach the masses to learn how to read. What happens is the masses will refuse. Why? It was because people who once read were seen as ‘stuffy’ scholars or ‘annoying’ priests. Reading was seen as an ‘upper class’ behavior. Why would the masses have it or need it? It would not make sense to them. And besides, it was not needed for their daily work and seemed like a waste of time which could be better applied to other things.
Now let us say Marty McFly arrives to the present day from the centuries in the future. This Marty McFly has a similar ambition. He tries to spread financial education throughout the masses. He is stunned as the masses reject it. While it is seen as ‘too complicated’ or perhaps a ‘waste of time’ by many, some people today have hysterical reactions. “Business!? No! No! I would lose my ‘culture’ if I did that! I am an artist! I am pure as the wind driven snow!” This Marty McFly would be stunned that some people respond to financial education as if it would make them less human.
“You’ve got it all wrong!” he would say. “It is totally the opposite. In my time, in your future, financial education is just as important or more important than academic education. Reading a financial statement is as important as being able to read a book. In the future, everyone is responsible for his retirement. The idea that a company or government would pay for your retirement is seen as actually very cruel because they would pay you only so little, much less than what you deserve. And then the company or government would soon go bankrupt which would condemn the people they ‘helped’ to poverty.”
“Such companies and governments are going bankrupt over this issue today.”
“Yes,” Marty McFly would answer. “It is why school systems were eventually revamped to include financial education and make it a center piece so everyone would have the basics down as to how to retire, how to invest for the future, and how to read a financial statement.”
“But you said financial education would make you more human. That is absurd!”
“Doesn’t reading allow you to be more Human? Wouldn’t someone being unable to read be at a tremendous disadvantage. You agree that academic education such as college is very helpful to human growth. So why do you have this stupid superstitious belief that financial education will somehow retard you as a human?”
“But it is only about money!”
“No. It is about time. The sooner you can retire, the more time you have in your life to do with as you please. Choosing your economic destiny is living your life on your means and doing the jobs you wish to do, not have to do. Imagine being able to not have someone tell you when to go to lunch, when you can go on vacation or not. Imagine women marrying men they actually love and not because of their income potential.”
“I cannot imagine that,” you confess.
“When only aristocracy and priests could read, they ruled the roost. When people refused to learn how to read, they were only giving these people the power to rule. In a similar way, people in this time who rule are those who have that financial education (and are jealously trying to ensure it doesn’t get into the hands of the masses). By refusing to learn, you are pitting yourself under their rule needlessly.”
Above: Why do you let people boss you around (financially) like George?
But you protest, “My father, grandfather, and great father did not need to know this. Why should I?”
“It is because you live in a unique time where things are shifting. Just as farmers could get away with not having an academic education during the Agriculture Revolution, your parents and grandparents could get away with not having financial education during the Industrial Revolution where they had nice pension plans waiting for them. But you will not have that opportunity they did due to the shift.”
“So I need to learn financial education?”
“And you need to teach it your children and your children’s children. The rich already do this which is why they are rich. It is also no coincidence that in this time period, politicians are shifting their actions more and more to finances because, traditionally, that is where they could always get away with it. The masses don’t understand finances. They expect to say with a straight face: ‘We need more stimulus because the first few trillion dollars wasn’t enough.’ Only the financially ignorant would entertain such a comment. But more and more people are becoming more financially aware. They are seeing what is happening.”
And then you read on the side of the DeLoreon the label “Nintendo”. “What is this!?” you demand.
The future Marty McFly answers as he hops back in to go back to 2085. “In the near future, Nintendo adopts all of Sean Malstrom’s sayings. This causes the company to explode in growth to such a degree that Nintendo bought everything including antique car companies that make ancient DeLoreons.”
You smile. “I think I’m going to like the future. I have no idea why I allowed people to let me think pessimistically about my future which only I control.”
Above: Roads? Where we’re going, we don’t need… “roads”….