There are many trains of thought out there regarding to the economy and how things are going. In this, we need to look long-term, multi-decades, as opposed to just the present circumstances.
As with anything long-term, we suffer from the "slow bleed" syndrome. Our leaders make claims that most people overlook since it is not evident in the moment. Over time, a "new normal" arises which we simply accept.
This is no more true than when it comes to the global economy. We are mired in a downward trend which is simply not acceptable. Our present economic system is erected in such a way that it basically strangles any long-term, exponential growth.
In short, we are falling way behind the historical curve. This is something that we need to solve. The fact that it is happening when we see computerization and automation racing ahead tells us how the system needs changing.
When we look at the long-term annual growth of the global economy we can see how things are slowing down. It is now acceptable to have a 2%-3% growth rate. That is abysmal in terms of historical norms.
Here is the economic growth rate according to the world bank.
As we can clearly see, there is a distinct downward trend over the last 50+ years. We were growing at a rate of 6.7% in the mid 1960s yet, in the last 10 years could barely get above 3%. How is this possible in an era where we are producing more than every before?
What is fun is this chart does not have 2020 as part of it since the year is not yet complete. We can expect another downward spike similar to 2008-2009.
The biggest problem is we have a global economy that is full of parasites. At every layer, there are people doing nothing but bilking the system. They serve no purpose other than to extract more money from the system, ie others. Here we see how the producers are shorted because they have to support those who actually contribute little to nothing.
It is easy to bring ideology into it. However, this permeates both sides of the aisle. A parasite is anyone who sucks off the teat of the system. This includes people who fake disabilities, doctor overcharging Medicare, bankers who just take a percentage to move money around, corrupt politicians who line their pockets, lobbyists who do nothing more than curry favor for other rent seekers, and non-profits that exist only to pay high admin fees while accomplishing nothing.
Basically, we have an economy where the rent seekers have firmly implanted themselves in the core of what is taking place. This leaves the producers having to carry more of the burden.
Of course, on a global scale, this ends up taking its toll from an economic perspective as the chart shows.
You would think that a world where central banks have printed money like never before would tell a different story. After all, we are told that money printing will lead to inflation, causing prices to increase. If that were the case, how come the long-term economic trend is in the other direction?
Looking at it closer, we see that, post the Great Recession, 2010 was the peak.
We can also see how the economy was falling even before COVID-19.
This with central banks printing $23 trillion during that time period. Something is very amiss.
A bit part of the problem, in my view, is money for the sake of money. We have a system where making money is the most important thing; in fact we can say it is the only thing. Maximizing profits is really all that matters.
The biggest part of the money printing issue is that the money never gets into the economy. Here is the excess reserve that the banks are holding.
It is important to note that the Fed started paying .1% interest on reserves starting in 2007 or 2008. As we can see, the amount of money the commercial banks left with the Fed exploded.
It is now over $3 trillion as over the end of November. That is money that never made it into the economy but was "printed" by the Fed.
We also see who the chart follows the Fed's easing program. In the last financial collapse, quantitative easing began in earnest, The Fed stopped in 2014, a point where the reserves started to drop. It accelerated in the last year as the printing presses kicked in.
This is the mindset across the board. As a society, we are focusing upon things that make money as opposed to things that really change society and end up producing massive economic growth.
For example, the application SnapChat is interesting as well as successful. It went public with a $3 billion payday. While that is all well and good, the question is did the world really need another messenger application? Would humanity have been ill-served if the company was never invented?
We see trillions (actually quadrillions) in the derivative markets. These are instruments that are designed for no other reason than to speculate in an effort to make money. For the most part, they serve little purpose. Sure some are used as a hedge for businesses but that is only a small portion. The majority are to speculate whether something will go up or down.
Imagine if all that money went into things such as research of quantum computers or cancer. How about pushing that into the area of longevity studies which essentially is working towards the eradication of diseases? What if that money went into the development of rapid producing construction materials that would allow us to produce homes in a matter of days?
The point is that we have wealth inequality because we became a world where making money was the sole focus. This obviously benefitted those closest to the central banks, the ones who create the money to start with.
The global economy needs a reset and not in the way Klaus Schwab and the other billionaires believe. Destroying the global economy so it can be rebuilt is not the solution. In fact, it is already on a path to epic failure.
Instead, we need to look at the monetary system which nobody outside crypto is willing to do. The fact that money is a tool of collaboration is lost on these people. To them, the accumulation of it is all that matters.
It is for this reason that we see a velocity of money chart that looks like this.
For 40 years, the velocity of money has been going downhill. In other words, it is not working its way through the economy. When a billionaire acquires another 10% on the annual income, what do you think happens to the money? Is it spent on goods and services? Not at all since a person like that has all that is desired. Instead it is stocked away somewhere, usually Treasuries, earning a consistent return.
We see the same mindset with our major corporations. As opposed to spending massive amounts more on R&D, a move that might provide a return, they engage in financial engineering by buying back their stock, making their numbers look a lot better.
Cryptocurrency is the answer for a couple reasons. To start, it helps to eliminate the rent seekers. The entire financial system removes them from the equation, at least to a large degree. There will be places where they crop up but it is likely those are short lived. Technological automation is such that they can be put out of business with a new piece of software.
We also see that money is not going towards the few at the top but is being distributed to anyone who gets involved. Certainly there are Whales in many of the cryptos, yet they are different people than what the world presently deals with. Hence, we are seeing wealth starting to spread out.
This will continue as more projects come online. The real transition will take place when ventures that can increase global growth are funded with crypto. Instead of going to the same sources, who are only looking at the ROI, projects can be funded through crypto by people who are actually concerned about that particular topic.
Thus, instead of another messenger application or a platform to stream movies, we will see attention paid to those areas that can truly stimulate enormous economic growth around the world.
By going direct, we can cut out the parasites who serve no other purpose but to extract from the system. Over time, these people will wither away as their value is reduced to nothing. This will happen both on a micro and macro level.
Eventually, we will see that money is used more efficiently, providing us with a system that can advance at a rapid pace as compared to the snail that is presently feeding the global economy.
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