I should probably note for general information that any text in atypical capitals means it's a specific topic of thought in my Second Brain (the evolution of my Commonplace Book).
Last time in the Retrospective we covered a LOT of years of recent history, and asked a lot of questions. But what about the future (which, incidentally, is all we can do something about), instead of the past?
What of our current economy will best survive the post-Fed bubble-pop? What will endure and survive any restructuring that will eventually come along with the Rise and Fall prognosis? What about a post-Capitalism shift that is probably coming with AI and automation making in-roads into human employment?
Perhaps just as importantly, how do I want to spend my remaining career time and personal efforts? Do I want to keep gears spinning in the big Sand Castle machines of international engineering machines, or should I focus more specifically on a specific area, or even dare to strive to build a Big Stone Head?
Economics:
- We are almost certainly headed for some form of crash and serious correction, and probably a restructuring more painful than 2008. Since 2009, we've vastly expanded our national debt spending. Already we have bizarre phenomena occurring, and probably this weirdness will not persist. I struggle say "when", but I think "as soon as the Fed stops spending, and some inciting event occurs".
- Brooking's projects that it will take several years for consumer spending to get past the pandemic setback. This means bad things for a lot of service workers and for many businesses. https://www.brookings.edu/blog/future-development/2020/12/14/the-decline-and-recovery-of-consumer-spending-in-the-us/?utm_campaign=Brookings%20Brief&utm_medium=email&utm_content=103005940&utm_source=hs_email
- Realistically, as soon as we're past one crash, another is brewing. Usually we have something every 7-10 years, and a larger one every 30-60. Dalio says every 80-100 we should expect a "restructuring". The COVID crash is going to shift the landscape for the current cycle, but it's not clear it actually cleared any of the old bubbles and debt, so I think more pain is yet to come.
- Deflation? Inflation? I think as long as the US is still the primary reserve currency, any global stress will cause a flight to dollar, which coupled with purchasing collapse will be deflationary. This is the common US response since business supports are stronger than individual supports, so most big crashes are going to be demand-implosion-driven. When the Fed acts, it will be inflationary, but more-so if our reserve status is weakening. So far, we have not much seen this, and the dollar remains pretty strong, but it will eventually weaken.
- Carrying debt will be risky, as loss of work and strengthening dollars will hurt those with debt. This is the mode we're in today, for example, in housing. Food is up in price, but energy is way down. Even without actual deflation, debt can be hazardous. The recession taught us "prices may be low, but that doesn't mean you have any money to buy stuff with".
- Making it through the first phase and into the spending phase will mean that debt will inflate away...maybe. This will be a hard pattern to time it through. Inflation can pay off debts for you, but income increases lag expense growth, and those near the edge may fail.
- There is always the possibility of stagflation, if we loosen up creation of money and the dollar re-positions. The next variant may be different, with job challenges driven by automation and AI while prices increase, and all scramble for few jobs.
- End of superpower? End of reserve currency?
- Honestly, I think Rise and Fall of Empire will be more of a concern for my kids -- I'll probably retire before the next restructuring, so my goal is to simple "hide" assets from major impacts of such shifts so I can survive my latter years. As for durable professions, it's always safe to address the lower layers of Maslow's Hierarchy -- you're better off addressing existential needs than minor luxuries when TSHTF, especially in a situation where those who buy luxuries are being dragged off to guillotines and gulags. People always need places to live, and they need food, water, and the basics of communications and transportation. People who just keep things working are in pretty high demand during any downturn.
Personal Legacy
- I'd like to at least more intentionally build Sand Castles for forward-looking industries. The whole world runs on Sand Castle building, so this isn't a bad thing, per se, it just won't provide strong self-actualization if you look at your legacy this way.
- If I can manage it, I'd like to make attempts at building Big Stone Heads.
- Sure, I'll support family and community -- replicating DNA is a pretty basic target.
- Technology, such as increasing Economic Complexity, is a good goal. This is how we keep our local community and US economy vibrant.
- It might be easier than it seems to accomplish this, as most people don't think in terms of creating durable, replicating information or expanding Economic Complexity. It's not quite a Blue Ocean Strategy, but it's close. In my experience, it's not hard to accomplish things when the rest of your organization is moving randomly and you push hard in one direction; the trick is in convincing yourself which way to push!
Investments - What will I do?
- Keep the barbell - part really safe, part very risky, not much in the middle. I've always struggled on the risky side -- my life is too "safe".
- The "safe" end includes wholly-owned property, cash, and metals. This, for me, is quite attainable.
- "Safe" retirement investments include US property, US bonds, Int'l bonds, as low-risk but not large volume investments. These are valuable in a deflationary situation, or a status-quo future.
- The risky end? This is high-return to beat inflation in debt-collapse futures, or upside wealth in good times.
- US equities - high-alpha stocks, probably?
- Int'l equities - same as for US, only geographically hedged with EU and Asia.
- Maybe a property bought with credit? A resort AirBNB? A 4- or 6-plex in a college town? The debt is the risk, so in a bad case this gets foreclosed...in a good case, it pays itself off.
- Maybe a start-up business? This is the fun one to think about, but the hardest by far.
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