Is Our Economy Really Working?

Welcome to This Week’s Leyendecker View

The most powerful person in the world is the storyteller. The storyteller sets the vision, values and agenda of an entire generation that is to come.
–Steve Jobs

THINKING OUT LOUD

Is Our Economy Really Working?

The St. Louis branch of the Federal Reserve tells us that in 2007 total public debt to GDP was around 63%. Today total public debt to GDP is around 122%. That we keep growing debt faster than we grow the economy begs the question: Is our economy really working?

When the housing crisis of 2008-09 spread like wildfire through the American and then European banking systems, the end of fiat currency was likely closer than we may still realize. Banks had massive counterparty risks. A chain of dominos was on the edge of collapsing.

Did anyone at the time know just how much we were teetering on the brink of collapse? Has there been any open acknowledgement from anyone who worked at the Federal Reserve, in government, or on Wall Street at the time that we were days, maybe even hours away from a complete implosion of our banking system. If the banking system had fallen it would have destroyed the fiat currency system, which would have put the world in a depression.

Before time ran out, Treasury Secretary Hank Paulson got into a room with all the big American banks to figure out how to stop the contagion. And thank goodness they did. 

If the fiat currency system had collapsed, no one—the individual paying rent, the landlord paying a mortgage, the food processor paying the farmer, the farmer paying the seed supplier, and so on—would have been able to pay their bills. In today’s world, if there is no fiat currency, there is no commerce. If there is no fiat currency, there is nothing but barter in its most basic form. I’ll trade you eggs from my chickens for milk from your cows.

Since then, the crypto bros have been sounding the alarm on this plausible nightmare scenario since the crypto “tulip craze” began. The collapse of fiat currency is one of their biggest justifications for crypto. But what they don’t seem to be considering is that, if the fiat currency system collapses, there is no electricity. And if there is no electricity, there is no internet. And if there is no internet, there is no crypto. 

Back in 2008-09, when our economic system was about as fragile as an ice skating pond in early November, we just about fell into the water and drowned. How could the “smartest” people in our economy make such a mistake that the entire economic system was so close to failing?

My first conclusion was that technology had advanced faster than our job market and worker skills could keep up. This “blip” in our economic system had somehow been the result of a widening crevasse between the jobs technology was destroying and the jobs that were replacing those destroyed.

Somehow, a lag effect had sort of caused our economy to become ever more fragile. But that was just a symptom of the disease that eventually came into view.

Let’s assume that all economic activity is not too dissimilar to all human activity.

There are three things every single human does with his or her time. There is productive activity, leisure and life maintenance. The math is simple. It is the economic rewards of our productive activity that pays for our leisure and life maintenance. 

Extrapolate what each individual does, and we can conclude that an economy functions in a similar way. In essence, it takes the economic rewards of production to afford our expenditures on services, since leisure and maintenance are services.

All service requires a master—the ultimate customer who pays for that service. And when you consider the breadth of economic activity, production has been the ultimate master for the majority of human history.

Today you can read all over the internet and news that consumption represents 70% of our country’s GDP. And you can dive down a few inches into the data to see that services dominate our economic “output.” 

But when there is not enough productive activity—that is, not enough internally-generated production—there isn’t enough economic reward to afford all that consumption and those services. Which brings us to today.

Since 2007, our country’s debt to GDP has risen from around 63% to 122%. The easy conclusion should be that service serving service that serves service is not a sustainable economic model.

If anyone cared to really do the math, we would probably find out that the economic multiplier of goods production is much much greater than it is for services.

Okay all you smart folk, dig up the data, do some analysis and tell us the possible solutions.

THE ECONOMIC VIEW

Even as US labor market wobbles
US consumer confidence hits 6-month high
Yet the American dream seems out of reach
While $1,000-a-night hotel rooms grow in number
Q2 GDP grew faster than first reported
Inflation holds steady

Poorest consumers running out of money
So says Dollar General chain.

One job is not enough
Many Americans need two to make ends meet.

INFLATION, DEFLATION, OR BOTH?

China controls vital chip materials
And they’re restricting supply.

Here comes the Chinese auto juggernaut
BYD assaults Western auto makers.
They’ve conquered the Mexican market
Britain welcomes their cheap cars
Western consumers need cheaper cars, too.

Will China export deflation around the world?
And will it doom its economy in the process?
Japan seeks tariffs on China’s steel

THE LABOR VIEW

What really motivates employees?
McKinsey did the survey
Bosses are trying to pay workers less

Internships are drying up
Especially in tech and finance.
1 in 5 young men not in workforce

40%+ of full-time US workers
Do not make a living wage

MEANWHILE IN EUROPE

The UK’s Labour Party swept July election
Now more than half the country is unhappy
While sterling hits a 2-year high

German economy keeps stumbling
They need more tourists!
German inflation falls fast

Europe needs a new economic vision
They’re rapidly falling behind the US and China.

THE GLOBAL GAME

Asia’s got a ticking time bomb
Persistently high youth unemployment.

Investor interest in hot India market cools
Where’s the hot money going next?

Foreign powers compete for Africa
This is not a story from 500 years ago.

THE UKRAINE FIRE

Ukraine’s Russian offensive
Shows that Ukraine isn’t rolling over
Does Russia have a Belarus strategy?

Ukraine is using the F-16s now
Will Putin push a cornered-rat strike?
One of those F-16s has crashed

Russia pounds Ukraine with missiles
Death and destruction remains their strategy.
Ukraine seeks Western approval to retaliate

THE GAZA FIRE

UN warns about Iran’s nuclear efforts
While Iran talks a different game

Israel and Hezbollah went to war last weekend.
Then they pulled back
As they keep pressure up on the West Bank
The West is frantic for a peace deal

Houthis hit Red Sea oil tanker.
Risking environmental catastrophe

THE SLIPPERY SLOPE

US and China hold strategic talks
Can common ground really be found?
China’s renminbi gains trade momentum

China invades Japan’s air space
They didn’t mean to do it.
Japan will now spend $2B on air defense

China and Belarus to be true partners
Putin’s buddies become buddies.

FINANCE

The IPO market gets cold feet
Time for a sector rotation.

The next gold rush industry
Might be defense contractors

Subway’s sales slump
Just after its new owner levered up
Will Subway follow Red Lobster’s path?

REAL ESTATE

Home price index
Hits another record high
Home prices surging faster than incomes
Lower rates won’t fix affordability crisis

$557B evaporates from urban offices
But the suburbs are holding up.
North American office usage peaked years ago

Where US apartments are being built
Get a rebate for paying your rent
Are landlords getting the squeeze?

INFO TECH

Telegram CEO charged with app criminal activity
Are they going to arrest phone CEOs, too?
Should his arrest worry us all?
Will this drive entrepreneurs out of Europe?
What does this mean for free speech in America?

Nvidia knocks the cover off earnings
But the stock falls. Has the AI boom peaked?

Text an Australian employee after hours
And it could cost you $13,000

OTHER TECH

Scientists’ new methane-to-methanol conversion
Is a game-changer.

New pain killer may be coming
That’s not addicting.

Drones aren’t just for killing.
They can find land mines, too

THE CHAT ON AI

CA passes controversial AI bill
Will the governor sign it?

Buy-now-pay-later company slashes workers.
And replaces them with AI

Here come the personal assistant bots
How much will they cost us?

OUR GOOD FRIEND, FAILURE

Parenting is now bad for your health
Let the government raise your kids.

Lowe’s scraps DEI
Ford backs away, as well
Yet DEI dogma permeates higher ed

Teachers are burning out
Let AI teach the kids, right?

THE NEXT NORMAL

Is political corruption at a fever pitch?
Maybe so, if it’s following California’s lead

Those giant TV sports contracts
May not be worth the investment

Human population set to peak in 2084
Then will the climate stop changing?

THE WAR ON CARBON

EU cities with lowest carbon emissions
Have the most air pollution

New Zealand to reverse O&G ban
Politics mugged by practicality and reality.

Electra is making green steel
Is it scalable, and how is the acid recycled?

THE ENERGY TRANSITION

Offshore wind installs keep surging
Renewables catching up to natgas

Facebook looks to geothermal energy
To power their brainwashing machine.

Can salt caverns store renewable energy?
Maybe, but can it be cost effective?

THE EV DREAM—OR DELUSION

GM delays battery plant
Maybe they don’t need so many.

Canadian tariffs on Chinese EVs
Will be 100%

Only 3 in 10 Americans
Would consider buying an EV
While 30% of EV owners want back to gas

THE CHINA SYNDROME

China gets access to Nvidia AI chips
Is stealing okay to them?

IBM shuts down R&D efforts in China
They must be tired of China stealing IP.

China has 48MM unbuilt homes
That buyers paid for during boom times.

THE WASHING-TONE

SCOTUS rebuffs Biden’s student loan deal
When can we get mortgage loan relief?

FTC ponders grocery store merger
Will it lead to market dominance?

The DOJ investigates apartment owners.
An app lets owners price-collude

THE ELECTION DISTRACTION

China sees “two bowls of poison”
They don’t like Trump or Harris.

The Teamsters are not unified
In their support for either candidate

MAKING A BETTER YOU

The best thing for your health
Is to sleep well

Boost your communication skills
With the “ladder of abstraction”

Need to cool down your home?
Get some plants in it

HOW ABOUT A BREAK

Calculate your life expectancy
In various parts of the world.

The myths and lore of the Milky Way
Home sweet home.

The butterfly effect
Is it physics or human agency?

MUSIC BOX

Nigerian jazz legend, Fela Kuti
“Zombie”
A true revolutionary.

Who remembers Enya?
She hasn’t gone away
“Only Time” is timeless.

Spotify has a fake band problem
AI is destroying human creativity.
Illustration app tells AI to shove it

CASTING AROUND THE PODS

Argentina has massive oil & gas reserves
Can they fuel a true economic turnaround?

VIDEOS OF THE WEEK

Rings of Power season 2 trailer.
Can it match House of Dragon’s success?

The KAOS trailer.
Jeff Goldblum as a pissed off Zeus?

The zen of Chinese tea tasting
Each sip is a rich expression of memory.

FROM THE HEADHUNTER’S KITCHEN

How the cowboy wok won the West
Got your discada yet?

Flour tortillas with butter and honey
Much much better than a Twinkie!

Foolproof way to make jam at home
Will canning become more popular?

THE RANDOMS

I wonder if homeostasis might apply to today’s climate change hysteria. Might the earth already be healing itself with more CO2?

Why is the American dream to own a home? Is it because ever rising home values are a big store of savings for so many people? If so, good luck if the rising home value trend reverses.

Go to church, and you’ll often hear God being referred to as a “He.” Some people think that’s sexist and that God could be, maybe should be, referred to as a “She.” But if God can be represented by the female sex, it means the devil can be a “she,” too, right? If there is an all-knowing “she,” then there can also be an ultimate evil “she.” Right?

Oh, maybe this is why so many people today are confused about the sexes…er…genders.

One thing a lot of us don’t seem to understand—there is no production without waste. None. Can’t happen. Production of everything produces waste. So when people talk about “clean energy,” they either have limited knowledge of the processes to create energy, or they are flat out lying.

Donald Trump proposed not taxing tips at restaurants. Kamala Harris followed his lead and suggested the same. Jamie Dimon had been rumored to be a potential Trump cabinet member. Kamala Harris followed that lead and suggested the same. Trump wants a border wall. Kamala Harris followed his lead and just suggested the same. Trump has continued to campaign on Make America Great Again. Biden pitched Build Back Better, which, if you remove Trump Derangement Syndrome, is essentially the same. Trump may be a difficult personality but then the Democrats seem to be following his lead. 

The bigger and more complex any system gets, the more systemic risk grows. Hey tech bros, pay attention.

IN CASE YOU MISSED IT

Who Should Vote?
August 23, 2024

The Two Americas
August 16, 2024