(Key: Rob’s comments in italics, Derek’s comments in normal font)
In this episode, we review what's happening in the world right now. We're reaching some sort of endgame with a process that's been ongoing for a long time in economics. We're hitting a wall with the idea of endless economic growth. To maintain stock market prices, which many see as essential, there has to be continuous growth in profits. Historically, this growth was genuine, with more goods and services and increased prosperity for significant segments of the population. But since around the 1990s or the turn of the millennium, this growth has become increasingly artificial.
Image credit: Daniel Foster (Flickr)
Planned Obsolescence and Inflation
We’ve discussed planned obsolescence and the illusion of measuring gross national product by flow rather than the stock of wealth. The system isn’t serving us with rapidly obsolescent products. Instead, it fuels economic growth artificially. For example, products are designed to be less durable and less repairable, necessitating replacements, which increases economic activity but doesn't serve consumers.
I don't think anyone gets really excited about buying a new washing machine, do they?
No, not unless they've succumbed to the illusion that this is what they want. Competition was supposed to improve things, but the ownership of large-scale enterprises is increasingly concentrated, making competition an illusion and leading to unchecked price increases. We've seen this with energy prices, public transport, insurance, food, and housing. Although the inflation of housing purchase prices is faltering, there's an effort to keep it going, which spills over into rental markets with rising rents and evictions.
Shrinkflation and Income Stagnation
There’s been a sneaky inflation in food products by reducing package sizes. For instance, packs of butter and tea have decreased from 250 grams to 200 grams. People face higher costs without corresponding income increases, and this can only continue so long.
Corporate Land Ownership
In the U.S., large corporations and hedge funds buy residential houses and apartments at more attractive loan rates than the average consumer. This trend extends to agricultural land, with figures like Bill Gates owning significant portions.
Yeah, I saw that BlackRock had been buying large amounts of property in Florida and places. Do you have any speculation on why that is?
If I had enormous liquid assets, I'd want to convert them into tangible assets quickly. Agricultural land is one of the most tangible assets available. There might also be an agenda to control food supply, as necessities of life are being squeezed. People have no choice but to seek shelter, buy energy, and transport themselves.
Systemic Unraveling
The system is running out of road. There’s a point where it will unravel, and the system will have to be called to account. This reflects Stein's Law: if something cannot continue indefinitely, it will stop.
Geopolitical Turbulence
The current geopolitical turbulence, with extended warfare and vast resource allocation to conflict, also reflects this. War destroys wealth and resources, which contradicts the goal of increasing global wealth.
Yeah, I'm sure Blackrock will happily go in and reconstruct Ukraine and Gaza and all of these places when the dust settles.
Yes, just to restore things to where they were before. This cycle has been ongoing since World War II, often out of sight and mind, with Western powers arming and training groups that fuel conflicts.
Conclusion
I am just looping back to some of our earlier threads. I definitely, like a lot of my friends have had like mortgages come up for renewal and stuff and the price of their mortgages like double overnight, stuff like this. And this is just going on all the time. And you know, I've got friends who've had pay rises at work and gone on to like more senior roles and consequently they see their kids less. They have more responsibility and they...
Yes, many people experience similar situations. They get pay rises but still have no money left at the end of the month because of rising costs. This can't go on indefinitely.
And this can't go on forever. It can only go on so far.
Indeed. We don't know how this will play out, but it could be ugly. Complex dynamic systems can fade out, crash dramatically, or create novel structures. We must act with integrity and watch how things unfold.
The pendulum will swing back. If we think about the pendulum since the end of the second world war has been swinging one way, it will swing back and it is swinging back. But we're kind of mid swing at the moment.
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