By Randy Brunson
SUWANEE, Ga. | “May you live in interesting times.”
Whether a blessing or a curse, we certainly do live in interesting times. Let’s give perspective a shot from a couple of angles, by taking a short walk through history, starting in 1865. We will look at 80-year governance cycles, as well as economic cycles, which seem to turn every 50 to 60 years. And know that these are no more than highlights.
The era of the Truman Doctrine appears to be coming to an end. The world order of the U.S. as the world’s rich uncle and policeman seems to have run its course.
For several years a number of countries, most notably China, have been looking to replace the U.S. dollar as both the world’s reserve currency and the unit for international transactions. Executive branch decisions will likely accelerate this trend. The rise in the price of gold has less to do with purchases by retail investors and much more to do with many nations buying and stockpiling gold, instead of US dollars, to support their currency.
It would seem to us that much of the vitriol directed at the federal government is not simply its size. It has to do more with its complexity and intrusiveness. The federal workforce of ~2.4 million is 0.7 percent of the population, in line with historic percentages, though less than during Johnson’s Great Society years and the period at the end of World War II. The explosive government growth has been at the state and local level.
On the economic front, interest rates have risen in the last two years, after an almost steady 45-year decline. The shortage of qualified employees in many fields seems to be more of a multi-decade secular trend than a short-term blip. How do we evaluate all this in a manner which allows us to bring some insight into what’s next?
During the last half of the 19th century labor was plentiful and cheap, and the rewards went to capital, creating the fortunes of Rockefeller, Vanderbilt, Carnegie, Morgan, and others. This led to the rise of labor unions in the early 20th century, which transition was at times violent.
The 50+ years following 1920 was a golden age for labor, when one income could often provide for a family. Many of the boomers were born into these circumstances. The last fifty years? Labor, or employees, have faced flat to declining, inflation-adjusted incomes. While the rewards have gone to capital. Bezos, Buffett, Gates, Walton and Zuckerberg are representatives of the rewards to capital. As a result, many employees feel completely disenfranchised and left out of this prosperity.
What’s Next? The truth is, we don’t know. We can only speculate. Regarding capital and labor, we expect the next 50 years to be more rewarding to labor, less rewarding to capital. That should be good news for those early in or midway through their careers.
If China, Japan, and other countries reduce their U.S. debt holdings significantly, will Treasury need to increase interest rates to make the debt more attractive? Or will Congress mandate that all pension and retirement plans hold some level of the nation’s debt? Or will Congress actually balance the budget and begin to pay down debt?
One of the best books I’ve read related to some of these ideas is The Storm Before The Calm by George Friedman. I recommend it. In the meantime, we will keep a calm steady hand at the helm as we live in interesting times.
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