| HN Mirror

Yes but the situation is very different. We have fast declining productivity, and nothing seems to be able to arrest that.

Now what is declining productivity ? Well, it's a measure of how much you make, on average, from one unit of human labour. In other words: how much can one single average human produce, given the odds of them having a job (so automation is not really a positive factor for productivity anymore).

This is a critical figure for lots of reasons. Firstly, it's effectively an upper bound on average income (not average pay, as unemployed people should be included in the average). It's the maximum amount you can possibly spend, as a nation, on average, on a human, per year, without going in debt. So one might say, the maximum you can spend, sustainably.

Of course the current productivity figures have already been propped up majorly by unsustainable debt spending, which won't be possible in the future unless we start really growing the economy again. And let's face facts here : if Obama's Government and FED spending couldn't do it (and they didn't), nothing can.

So that means the average "value" available to a single American, or citizen of the world in general, needs to go down from this point forward. Note that I didn't say money, and in fact, Trump's fiscal spending, assuming it happens, will increase the money, but increase prices more. So everyone who isn't dirt poor or 0.001% or so will have to deal with less means available on a sustained basis from here forward. Less living space, less food, less traveling, ... unless we get productivity rising again.

The theory that is making the rounds is that we're demand-bound. And indeed, you find support for this all around. The concept is that productivity is lagging because producers are demand bound. We have to idle car factories almost 30% of the time worldwide and still have more cars than can be sold. Oil is in a price trap, and despite a 60%+ drop in price production went up by maybe 5% (of course oil is famous for it's price elasticity, but still). Chinese exports and even total production are flattening (assuming you take the real figures of what amounts pass through harbours, not the Chinese state's frankly untrustworthy figures, even those show lower growth though).

On the plus side, this does seem to be the idea behind Trump's trade sabotage. Fix the demand problem by taking non-American supply out of the picture through isolationism and/or tariffs. That may work. Of course, historically, it's also caused more than a few wars. But keep in mind, it won't be Trump that goes to war, nor will America likely be the target.

So if we are indeed demand-bound, well ... euhm ... Keynes had a solution for that. https://en.wikipedia.org/wiki/Military_Keynesianism (an economic analysis of the situation will immediately show however that just building a military doesn't work. You have to actually blow up more than a few countries to make this work. WW2 did that for Keynes)