End of an era.
You don't know the tide has turned until you look back and see that it already turned.
"Let's ride it up and sell it when it starts to go down."
I heard that sentence often from new clients during my career as a financial advisor. They would tell me to buy something that caught their interest because it had gone up in price. My clients were intelligent, reasonable people and their request sounded reasonable to them. However, there is an enormous contradiction embedded in the sentence. The going down trend is only evident after it has gone down. At the start the trend is still going up.
Lawrence Fink is the CEO of BlackRock, the largest asset manager in the world. His letter to shareholders caught attention. He said it was the end of an era for globalization. Several things happened simultaneously which reveal an enormous weakness in this sixty-year trend toward globalization in the post-WWII world. The world rode the trend up to the point where its fragility is too much to bear. COVID, war, and even a container ship stuck in the Suez canal exposed how delicate the world economy had become.
Businesses seek efficiency, and supposedly we all profit from the growing prosperity that results. Businesses want the lowest price from suppliers and they don't want the burden of inventory. Supply chains were getting so efficient and reliable that business sent the manufacture of parts, and sometimes final assembly, to Asia. Shipping by container is dependable and cheaper than paying American labor. Just-in-time inventory is efficient: Why pay to own and warehouse inventory when container ships and trucks could have goods ready when you chose. Capital, too, is globalized. Why invest in good opportunities in the USA when there are spectacular ones overseas, where companies have cheaper labor, where there is no EPA, no OSHA, no labor unions?
The transformation of global capital had consequences. Inflation declined and then disappeared. Business and final consumers had market power to insist on the cheapest and most efficient supplier. Walmart was notorious for insisting on the cheapest supplier, and then, when the supplier had made the factory investments to supply at the cheapest possible price, demand that they supply it yet more cheaply. Otherwise, they would shop for someone new, leaving stranded that company's investment made to supply Walmart. Walmart customers loved that. It was hardball capitalism. Customers, too, demand cheap.
We know better now.
Fink may be right and now we are experiencing now the reversal of great multi-year trends. Treasury rates have moved up--but it may just be a jiggle in a trend that will continue indefinitely. We don't know yet.
Mortgage rates have turned faster than treasury rates. Were you waiting to sell your house until home prices stopped going up? That nice young couple who might have paid top dollar a few months ago, made possible by low principal and interest payments, may be rethinking their options. Or this, too, might just be a jiggle in a long-term trend of low interest rates.
The world is not as safe a place to live, to invest, to manufacture, as we had gotten accustomed. There has been a change in the trend of our thinking. That change has taken place. The invasion of Ukraine reminds us that wars and revolutions are not reserved for skirmishes between small countries.
Maybe inflation, too, is a blip, but it doesn't feel insignificant or harmless. I paid $70 to fill up the tank of my Honda Ridgeline pickup truck. With inflation at 6%, while the cash in my accounts pays zero, I feel like I am falling behind, because I am. There is a mismatch between bond yields and inflation. The mismatch is what I would expect when the big trends turn. Eventually treasury rates, inflation rates, and mortgage rates will come into sync. Probably. But not now.
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We are learning that putting all of our manufacturing capability into the hands of a rising enemy has unfavorable strategic consequences. We are learning that our managerial elites never gave a f*** about preserving our middle class; it was profits uber alles. We are learning that our cultural elites never gave a f*** about preserving our middle class; it was smug virtue signaling all the way down — “let them eat code,” to paraphrase a certain French aristocrat.
I hope we are learning that there are things more important than low prices. I hope we are learning to value “Made In America.” I hope we learn quickly enough to prevent the triumph of an authoritarian, freedom-hating ideology whose rise we have been cluelessly supporting.
Made in the USA is very important for national security, too.
Greed and endless consumption are bad for the planet. I hope we are scaling back capitalism, which encourages greed.
The countries with the happiest people are typically socialist countries. Think about that.
The countries with the happiest people are typically socialist countries. Think about that.
They say they’re happy. They’d better, because it’s no fun in the Gulag.
“Everything may be changing.”
Change is the nature of life. The idea is to try and change things for the better. Whether getting rid of globalization would do that is debatable. It might be like trying to get rid of international travel. What we do know is that If we care at all about our offspring’s quality of life, we need to get the national debt and climate change under control. That would have a far more profound affect than whatever happens with globalization.
PS: Anyone who thinks Norway and Sweden have gulags is obviously unaware.
That's right, because there's so many gulags in Finland, Denmark and Switzerland... oh wait.
Uh, guys, Finland, Denmark, Switzerland, Norway, and Sweden aren’t socialist. They are capitalist social democracies.
The socialist countries are: China, Cuba, and Venezuela. They all have gulags.
Uh, guys:
For years, the U.N. has issued a world happiness report and the happiest people are Scandinavians. That’s because the Scandinavian countries have long been doing what democratic socialists like Bernie Sanders want to do for our country. Far-right wingnuts freak out and compare it to Venezuela because they don’t know the difference between socialism and social programs. They must get their disinformation from the same source that has them believing CRT is being taught in our public grade schools. Somewhere, they have an "alternative facts" factory, aka the right-wing noise machine.
Are the Scandinavian countries “socialist?” They don’t seem to think so:
In 2015, in fact, the Prime Minister of Denmark, in a lecture at Harvard’s Kennedy School of Government, addressed the issue directly.
“I know that some people in the US associate the Nordic model with some sort of socialism. Therefore, I would like to make one thing clear. Denmark is far from a socialist planned economy. Denmark is a market economy.”
The Scandinavian countries have social programs, not socialism. It seems to me that I am the one around here who knows the difference. Others seem not to.
CRT Is not being taught in K-12 schools. CRT-influenced curricula definitely are. Again, I am the one around here who knows the difference and doesn’t constantly and ineffectively try to obscure the distinction.
The thing is though, is that the right wing media and politicians are constantly attacking Democrats/left leaning folks as being in favor of "socialism." And we are, but not in the sense of wanting to be more like Venezuela or China or places that use gulags, rather we are in favor of the Scandanavian model shall we say. A system that in addition to producing the highest levels of citizen happiness on the planet also has things such as universal Healthcare, paid family leave, and high tax rates on the wealthy among many other benefits that people of my political persuasion would consider to be good.
To the left socialism = Denmark, Norway & Switzerland, to the right socialism = China, Venezuela etc. No one wants us to be the latter, and despite many proclamations from some on the right about the slippery slope from universal Healthcare to China style totalitarianism, I would argue the slope is no more slippery than the similarly forewarned (in dire terms from what I recall by the right wing) slope that was supposed to lead from gay marriage to beastiality.
OK. To avoid the quibbling, what Mc should have said is the countries with the happiest people tend to follow the Nordic model: An elaborate social safety net, in addition to public services such as free education and universal healthcare in a largely tax-funded system, public pension plans, etc. The fact remains, wingnuts call that socialism.
Rafe,
What I don’t understand is why the left in this country insists on using the word “socialism,“ when the Scandinavian countries are very clear that their societies do not fit that definition. Why not say “social democracy,“ or “Scandinavian-style“ instead?
It seems like totally incompetent political marketing to me. “Socialism“ has incredibly negative connotations to anyone who remembers the USSR, or is conscious of the evils going on in China, Cuba, and Venezuela.
This isn’t “quibbling.“ This is being precise about what we are talking about. The left insists on describing what they want as “socialism.“ The label comes from them, not from conservative propaganda.
If they mean Denmark, for instance, one would think they might notice that Denmark does not consider itself to be socialist.
I am not the one who named Bernie a “democratic socialist.” He named himself that way. He also honeymooned in Moscow in the 1980s, which at that time was the capital of the evil and repressive USSR. What does that tell us about Bernie? At the very least, he was clueless and blind to the evils of that particular form of socialism. I once did a song about that.
Mike, you have a nasty habit of unnecessarily calling people bad names. Why don’t you cut this toxic crap out? Your behavior is having a negative effect on these discussions.
To be clear: liberals, also known as progressives, are admirers of aspects of social democracy, as practiced in the Scandinavian countries. It's those on the far right that call us socialists - more out of malice than ignorance, I'm sure.
Dear Commenters:
I have written many times that Bernie Sanders and his followers committed self-destructive, self-indulgent descriptions of themselves using the word "socialist." There was a kind of 60s petulance in the action, sort of thumbing a nose at the grownups. The problem is that they are the grownups. Worse, it was making effectiveness less important than teaching people a lesson.
The result is that politics that were always a hard sell in America became dead-easy to caricature. Well, Bernie and his people made their choice, and America is worse for it. I consider it political malpractice and selfishness, rather like Bill Clinton fooling around with Monica, Gary Hart with whomever, or the critical winnable senate seat in NC, where the Democrat (Cunningham, I think) screwed around with someone two months before the election he was winning. So we have a 50-50 senate, not a 51-49 Stupid and selfish.
Back to commenters. Please use nice, respectful terms for people and position one disagrees with. It strengthens ones argument when one appears to respect but disagree with someone. It weakens the case when one makes demeaning little digs. Best of all, address the subject and never address each other. Obeying that rule of thumb would really help the discussion here.
Assert your positions. Don't criticize the incorrect positions of other commenters. I realize it may mean that someone else's false ad stupid stands un-contradicted. Let it fall of its own weight. Re-assert your position. Let them stand side-by-side. Your own brilliance will shine through.
Peter Sage
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