So with the coming holiday tomorrow, I think I have a little bit of time here to expound upon the 3 topics I listed above. Maybe I'll get into more of this tomorrow, or maybe not.
But anyway, just to outline where the gist of my point of view is coming from, I think:
#1. The coming demographic storm is going to be much worse than people think it will be. It will likely bring forth neo-fascist governments in Europe, and degraded living standards in the USA. I think the techno-progressive "look at all these cool gadgets and low crime statistics we have!" crowd is going to be in for a huge wakeup call when all the SHTF starting about 25-30 years from now.
I also don't buy the "American doesn't have the advantages and resources it used to have" argument either. If you have cheap labor, then you can grow faster, but this is relative to the rest of the world. I think U.S. standards of living were already top notch by the end of the 19th century, and yet sustaining robust growth was somehow not a problem until the rise of the entitlement era and high domestic government spending in the late 1960s. Is this simply a political impossibility because affluent electorates are inherently spoiled? I think the Swiss example would say "no."
#2. I think the public K-12 education system in America was damaged very badly in the 1970s, and hit a low point around the early 1980s. Things started to improve quite a bit in the 1990s, but there will still pockets of disaster zone school districts that were left behind. With NCLB and the charter and reform movement, things seem to be improving dramatically, and I think the momentum is clearly building for continued improvement here. The USA will have a much improved K-12 system by the end of the decade, which for a country of ~320 million, will be quite a feat given just how good many elite public schools (Thomas Jefferson in VA; Stuyvesent in NYC; etc.) already are.
Higher education is another matter entirely. I think a shitstorm is brewing here, and the U.S. advantage in university education is about to fall off remarkably. There are just so many bad trends going on here it's hard to talk about them all at once, but in many ways there IS
a bubble in higher education.
BUT... I don't think this will matter all that much for economic growth potential anyway. I'm in direct opposition to people who spout the talking point so popular among business leaders that we need to do more to ensure that our education system prepares students to enter the workforce armed with the skills need to make an immediate impact. This is completely wrongheaded thinking, in my opinion, and gets everything totally backwards.
The entire system where we have elite universities acting as gatekeepers to prestigious careers is itself totally ludicrous and abominable. There needs to be a greater emphasis on standardized tests and competitions at the university level, I think, and a whole lot of bull shite needs to be cut out so that the demand for formal university education programs is dramatically decreased.
In a way, it's the business world's own fault for not having in place its own education programs. On the flip side, however, it's really not the business world's fault at all, because firms are just responding to government discrimination regulations, university subsidies, and a labor law system that requires an ungodly amount of over-investment in new hires. I say "ungodly" compared to the obviously preferable alternative of having firms hiring a lot more people on a trial basis and simply weeding most of them out at low cost. That's how things are SUPPOSED
#3. The problem with all this ZIRP/QE theory spouted by Bernanke and others is that, just like with Keynesian multiplier theory supporting the 2009 stimulus, it is completely unable to be proven. You can say that about all economics, I know, but here it just gets sort of ridiculous: "Well, yes, we haven't been able to generate significant consumer price pressure since 2008, and we don't expect to be able to for another few years, but this just proves how bad things would have been otherwise!" No, it doesn't.
To me it just shows that ZIRP/QE has minimal ability to generate inflation, all while building up problem areas in the macroeconomy that will make generating inflation in the future even more difficult
! It is in this sense that I claim the paradoxical result holds whereby ZIRP/QE is actually contractionary rather than expansionary. This is what the Japanese case shows us.
I support ZIRP/QE as an ICU measure to prevent a deflationary collapse, as it was used in 2008 through 2010.
I do not support ZIRP/QE as a remedy to produce inflationary pressure where it doesn't exist, which is what Japan has tried since 1996, and what Bernanke has tried since 2010.
In the order of things to be avoided, my ranking goes something like this:
#1. Asset collapse and resulting deflationary spiral
#2. Higher government spending as a % of GDP
#4. Mild deflation
Right now, we are using #3 to prevent #4, all while promoting #2. I don't think it's going to work.
This post was edited on 4/30 at 1:10 pm