Sorry Our Group Karma Ran Over Your Economic Dogma

Your bogus financial dogma of “growth by means of the wealth effect” created the demographic karma that will bring down the status quo.

What occurs when you bleed your workforce while enriching those who currently own possessions with one bubble after another, all in the name of “promoting development”? To answer this, let’s modify a felicitous expression: Sorry Our Demographic Karma Ran Over Your Economic Dogma.

The Group Karma is young people can no longer manage houses, health care or kids therefore the birthrate plummets and the labor force shrinks to the point that the puffed up, heavily indebted status quo collapses under its own weight.

Demographic-economic chartist CH summed it up really succinctly in a recent Tweet:

@Econimica: Asset/RE bubbles (of properties mostly held by elderly/institutions) need to be preserved to prevent a banking/economic crash … but the cost will be the continuous collapse of families/births … conserving today at the expenditure of the future (again).

This dynamic of Demographic Karma squashing Economic Dogma is international, as evidenced by this Tweet about China’s demographic collapse and bubble-economy:

@fuxianyi: Chinese policymakers now deal with a dilemma: if the real-estate bubble does not burst, young couples will be not able to afford to raise 2 children. However if the bubble does burst, China’s economy will slow, and an international monetary crisis will erupt.

The Economic Dogma holds that inflating one speculative credit-asset bubble after another is terrific since each bubble produces a “wealth result” in which those who inherited assets or bought assets in the past are greatly enhanced by the bubble. Feeling wealthier, they then borrow and invest more easily.

This Economic Dogma— that bubbles are exceptional paths to “development”– is a kind of “trickle down” economics in which the rich loaning and spending more “drips down” to the middle class and working class.

As the charts below program, this theory is unwarranted and bankrupt: the rich get richer and richer and everyone else gets poorer and poorer with each bubble. What’s “growing” is wealth and earnings inequality as the demographic repercussions of this soaring inequality collapses the social contract.

Let’s go through the chart deck.

1. The US workforce is fully used. Numerous expect a recession and AI will slash employment and develop a swimming pool of unemployed looking for work at low incomes, but this isn’t how it works. As I’ll discuss in a future post, the mismatches in between the work employers need done and the abilities and desire of the labor force to do the work for the offered wage mean the joblessness rate can be high but employees are still limited.

2. The expectation that United States population and the workforce will continually broaden is not ensured, especially if immigration decreases. What is guaranteed is the population of retired people will continue increasing.

3. Wages’ share of the nationwide earnings has decreased for 45 years as the gains of the economy were shifted from labor to capital.

4. The top 1%’s share of wealth skyrockets to new heights in every speculative credit-asset bubble.

5. The middle class’s share of wealth drops in every speculative credit-asset bubble and only makes headway when bubble pop. (All of us understand what occurs when bubble pop: the Federal Reserve fraks out and develops trillions of dollars in stimulus that then flows into the pockets of the rich via the next bubble.)

6. Household net worth has actually increased far above inflation and the growth of the economy (GDP). As the charts above program, this wealth flowed disproportionately to the leading 1%.

7. Thanks to the Fed’s latest bubble–The Whatever Bubble— real estate affordability is at an all-time low. Put another method, the ratio of mean income to housing rates is at an all-time high.

8. To stave off the unavoidable karmic effect of severe wealth inequality– social condition– the federal government has obtained and blown tens of trillions of dollars on “financial stimulus” to buy the complicity of the 90% left behind.

So sorry Our Market Karma Ran Over Your Economic Dogma. Your bogus economic dogma of “growth through the wealth effect” produced the group karma that will lower the status quo.

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