Musings Report #10 03-3-12 Is the "new normal" truly normal?
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Is The "new normal" truly normal?
I had an interesting email exchange with correspondent Steve R., who reports that there is little evidence of recession in his Ohio town. Housing prices never bubbled up to absurd heights so they also haven't crashed. Most residents have college educations and are employed in middle-class jobs. Restaurants are busy and there are no homeless people or other signs of abject poverty.
As he summarized: "In short, where I live, I don't think it's a veneer of normalcy - I think things are truly normal."
This exchange made me wonder about "normalcy." In terms of the data points listed above, most of suburban America outside the hard-hit housing bubble areas of Florida, central California, las Vegas, etc. looks and feels "normal," i.e. non-recessionary.
But what is propping up this "normalcy"? We would have to list these extraordinarily "un-normal" sources of funding:
1. A federal government that borrows and spends 10% of the nations' entire output (gross domestic product or GDP) each and every year. (Technically, GDP is $15 trillion and the Federal deficit is $1.3 trillion, but this does not include off-budget 'supplementary appropriations' for things like Afghanistan, losses generated by Fannie Mae, and so on. Once you add in the off-balance sheet appropriations, the borrowing is $1.5 trillion or even higher.)
2. Student loans that are in a hockey-stick rise toward $1 trillion.
3. Local government borrowing or financial slight-of-hand (borrowing money from pension funds to make the annual pension fund payment, etc.)
4. Zero interest rate policy by the Federal Reserve that brings mortgage rates to non-market lows that are barely above inflation (if you believe official inflation is accurate; if the real rate is higher, then mortgage rates are actually lower than inflation).
This is just a partial list of the extraordinary subsidies in the trillions of dollars that are being pumped into the economy to maintain the illusion of normalcy.
What would the economy look like if this vast campaign of Federal borrowing and monetary expansion ceased? That would be "reality," and so in this sense the present "normalcy" is very much a veneer.
Is Data the new economic asset?
The computer processing revolution has made data-crunching affordable and fast on a global scale, and as a result the opportunities for data-mining and analytics have expanded exponentially. As this article states:
"Big Data is shorthand for advancing trends in technology that open the door to a new approach to understanding the world and making decisions. There is a lot more data, all the time, growing at 50 percent a year, or more than doubling every two years, estimates IDC, a technology research firm.
Data analysts help businesses make sense of an explosion of data - Web traffic and social network comments, as well as software and sensors that monitor shipments, suppliers and customers - to guide decisions, trim costs and lift sales.
A report last year by the McKinsey Global Institute, the research arm of the consulting firm, projected that the United States needs 140,000 to 190,000 more workers with "deep analytical" expertise and 1.5 million more data-literate managers. In the developed economies of Europe, the report estimates, government administrators could save more than $149 billion in operational efficiency improvements alone by using Big Data."
The article posits that the "value added" by Big Data analysis makes data itself the new high-value asset class, somewhat like gold or a "sound money" currency.
This is an intriguing line of thought, as it suggests that digital data is the new source of wealth and the new holder of value. Since "money" (other than gold and silver) is also digital, then what we may be experiencing is the merging of data and money: data is mined for value and that value is converted to whatever digital form of money the owner chooses at the moment.
This upends a number of traditional ways we have of thinking about and defining "money." If the value in data can be distilled, then it can be turned into BitCoin "money," dollar "money," gold ETF "money" and all sorts of other forms of digital exchange.
Perhaps data, distilled into certain formats or modules, will itself become a form of exchangeable currency.
From Left Field
Technology: nano-ear can detect sounds far below range of human hearing
"Most people are just a tiny dog and an eating disorder away from success."
Sean Humphries
Thanks for reading--
charles
