What’s Changed? What’s Different This Time?
This raises another question: how will the deflation of the Everything Bubble play out?
Causes generate effects. As noted in my previous post, if causal conditions have changed, the “guarantee” offered by statistics is empty. This leads to a simple question: what’s changed? Have the causal conditions changed enough to generate different results?
The status quo assumes the economy never really changes, and so the stimulus that worked last time will work again. This ignores the fundamental reality that change is constant and once causal conditions change, the effects will necessarily change as well.
So what’s changed in the 42 years since 1982? Why 1982? 1982 marked the end of the stagflationary 1970s and the start of the 40+-year bull market in stocks, real estate, and until recently, bonds.
1. China was just emerging from the Cultural Revolution. After 40 years of astounding growth, it’s struggling.
2. Debt levels across all sectors–public, corporate and household–were low compared to the present.
3. The global Baby Boom was entering peak earning, household formation, home buying, and starting enterprises. Now they’re retiring and entering the phase of selling assets to downsize and fund retirement.
4. Computer technology entered the mainstream economy and boosted productivity. Now we have AI but its long-term effect on global productivity is unproven.
5. Diminishing returns are manifesting across the global economy, as what worked so well in the boost p
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