Cyreenik Says
This 20 Jun 14 WSJ article, America Inc. Wakes Up to Wage Inflation by Justin Lahart, is one of several I have read this month whispering that wage inflation may be imminent. They point out that employers are now having more difficulty filling positions so raising the wages paid is likely to begin soon.
This is good news for those concerned with income inequality, and it is good news in general. It means that, slow as it has been to happen, the US economy is finally rebounding enough to squeeze employee capacity.
The other good news is that this should start interest rates rising back to more normal conditions. There will be lots of wailing and gnashing of teeth as this happens, but it is good medicine. It means that people will be looking a lot harder at the returns on what they invest in, and that means they will be looking harder for productive investments. Productive investments means more investments in things such as improving infrastructure, and that means improving overall productivity even more. The change will be painful for those who want to invest in "pretty things" such as convention centers, and social justice things such as housing and bigger pension funds, but a relief for those who want to invest in useful things such as better roads, data networks, factories and port facilities.
The advance of the ISUS faction in the Middle East chaos is a signal that change is in the works. ISUS is making news by taking cities in both Syria and Iraq. They are a faction that seems to be getting their act together. This 11 Jun 14 WSJ article, Iraqi Drama Catches U.S. Off Guard: The Quickly Unfolding Drama Prompted a White House Meeting Wednesday of Top Policy Makers and Military Leaders by Adam Entous and Julian E. Barnes, talks about the surprise in Washington at their successes in Iraq. From the article, "Iraqi forces' rout by a ragtag militia this week shocked politicians in Baghdad and Washington, but the troops and their American trainers have been warning for years that the Iraqi military wasn't ready for battle."
But the big signal this ISUS success indicates is that the big foreign players in this Middle East chaos are getting tired of the antics -- the publics of European and American nations are no longer as interested in what is happening there, or as concerned, so their governments are taking their soldiers, money and other stuff and heading home. This is leaving the field to the home team players -- there are many -- and what will happen next is going to be surprising.
What won't be surprising is that the puppet governments -- those supported by foreign Sugar Daddies -- are going to have a rough time. Most will disappear. This will happen because they have been doing a good job of representing the foreign interests that have been paying them handsomely, but not so much so the home team factions. These they have had to ignore or snub to keep the foreign support coming in. This 13 Jun 14 WSJ article, The Men Who Sealed Iraq's Disaster With a Handshake: Obama's rush for the exit and Maliki's autocratic rule ensured that much hard-won progress would not last. by Fouad Ajami, mentions this indirectly. From the article, "There was, not so long ago, a way for Mr. Maliki to avoid all this: the creation of a genuine political coalition, making good on his promise that the Kurds in the north and the Sunnis throughout the country would be full partners in the Baghdad government. Instead, the Shiite prime minister set out to subjugate the Sunnis and to marginalize the Kurds."
For me, this looks a lot like Vietnam and Southeast Asia of the mid-seventies. When the US pulled the plug there during the Ford administration, the collapse of the puppet government was spectacularly fast.
In the Middle East the end of this era won't be as fast because the factions aren't nearly as well organized as the North Vietnamese were in Southeast Asia, but the change as the dust slowly settles will be just as dramatic.
Some people still think the population bomb is still ticking.
I don't.
I see the opposite as being the hazard of the future: a world population that peaks at around 9 billion in 2050 and then declines steadily thereafter for many decades. An example of this happening today is Japan. This 31 May 14 Economist article, Japan’s demography: The incredible shrinking country, talks about how Japan's population is declining. From the article, "The government forecasts that Japan’s overall population, currently 127m, will shrink by a third over the next 50 years." -- down to less than 100m by 2064.
The root cause of this is prosperity -- Japanese men and women are finding many other things to do in life besides having and raising children. As prosperity spreads around the world, this hazard to sustaining the population spreads as well. The problem shows up more acutely in Japan than in Europe or America because the Japanese are much less immigration tolerant.
But as the world runs out of poor rural folk willing to emigrate (and it is) more and more places in the world will face Japan's demographic crisis.
The other crisis that is deeply affected by this is the "running out of resources" crisis. If there aren't many people on earth, and productivity continues to grow steadily, resources won't run out. This means this is not something to be deeply worried about. There are other worries that need to be addressed first because they are more real.
One surprising news item this summer is the lack of surprises, as seen by the financial community. There have been several articles on the low volatility of financial markets this year. This 22 May 14 Economist article, When moderation is no virtue, is one example. From the article, "The most notable thing in the financial markets today is the absence of anything notable: volatility has collapsed to near-historic lows."
This means the financial marketplace is not being surprised. It also means it is not being scared. From the perspective of Panic Thinking and Blunder Response, this is good. It means that we will be making fewer big, expensive mistakes in our financial choices.
But, as the article points out, it has other implications, too, which are not so heartwarming. It means that riskier investments seem attractive, even though the world is still a surprising place. And it means that disruptive technological change is not happening with enough magnitude to scare financial people. We are in a complacent era. Complacency is not good for progress.
Technology can give back what it takes away [in ecological and cultural damage], but poverty plays for keeps. -- Roger White
From what I'm reading on the Xinhua news site China is now entering its equivalent of Los Angeles in the 1950's: It is rolling up its shirt-sleeves and ready to get serious about fighting pollution. This 4 Jun 14 article, Xinhua Insight: China faces "serious" environmental challenges, is just one example.
This is no surprise to me. As a community moves from pre-industrial impoverished to post-industrial prosperous it must start the process by investing in productive assets, including those that pollute heavily. Once it has enough wealth it can afford to spend resources on controlling the pollution. That's what's happening in China now. It is a good thing, but fighting pollution is expensive, so it is a "cart" that has to come after the prosperity "horse".
Congratulations to China on making it to this level of prosperity.
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