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Global Growth Update: A World of Secular Economic Growth

Posted by nexvucapital on March 8, 2013

We have several themes for debate as our world returns to a period of secular economic growth (this is long-term stuff so day-traders move on):

The USA is entering a secular period of above average economic prosperity after a decade plus of working off the excess:

  • has the most productive labour force
  • is already automated
  • has a ready supply of cheap manufacturing capacity (land)
  • is entering a sustained period of strategic energy advantage
  • has plentiful other natural resources
  • has incredible technical creativity

China will speed up its timetable for urbanization and industrialization:

  • faces a critical ten year period within which to get its urban/industrial population into a ratio that can support its ageing population
  • current urban density numbers are wrong as they include migrant workers and therefore ~400 million people need to move into urban centres over 10 years
  • btw – this is why they build the urban areas before they move the people (living in a tent sucks)
  • btw – this is why they are pushing down urban real estate prices (residential affordability is an issue for an urbanizing society)
  • btw – they recognize these issues and if you have not noticed these folks are organized and have a plan

Europe will continue down the slow path toward a true economic union:

  • see the creation of the USA from 1776 forward
  • failure here will result in the failure of the EU period and that is not an option (they have demonstrated this)
  • then Europe faces its real issue – offsetting its ageing population with immigration (that should be interesting)
  • Note: Spain is actually in the enviable position of having a large pool of unemployed skilled workers

The 30 year waterfall of new entrants into the global skilled labour pool from China, India and the Former Soviet Union (FSU) is over:

  • the global skilled labour pool has more than doubled in the past +30 years
  • real wages for the skilled workers of the world are about to rise and with it the economic power of the global middle class
  • Sub-Saharan Africa is the last large untapped labour pool and represents a small percentage of the 3.0 billion current skilled labour pool
  • the excess rents paid to the capital component of the three factors of production (Land, Labour and Capital) is about to be shared more equitably with Labour
  • the next big issue will be a shrinking global labour pool and the rise of collective labour activity in China, India and the FSU

The current Debt/Deficit to GDP issues in the developed and developing world are going to be reduced via growth over time (see 1950 to 1965):

  • firstly, these debts were necessary to avoid a global economic catastrophe
  • fiscal discipline is the mantra of the voting populations (delicate now) of the consistent economic performers in the developed world
  • subsequently, politicians in these regions will be forced to exercise fiscal discipline by their populations
  • contrary to current economic prognosticators the revenue side can be increased by raising taxes (this is debatable) and/or by increased taxable incomes
  • the expenditure side will move toward deficit reduction as increasing real wages will offset the 30 year effort by government to subsidize wages via entitlements etc. while the distortions in the global skilled labour pool (see above) worked their way through the system

In conclusion, despite the best efforts of governments around the world to interfere in the market mechanism for handling secular shocks the markets are a force of nature and never discount the human need to make life better for our offspring (btw – another force of nature).

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