A Benjamin Cole post
The secular stagnation arguments in many ways boil down to a supply-side vs. demand-side joust.
For now, I am on the demand-side: Print more money.
Why? Name for me the industry that is supply-constrained, that needs lower taxes, regulations or more capital to expand to meet unmet demand.
When we look at autos, computers, energy, clothing, commercial real estate, we see again and again glutted supply.
Name a single automaker you would invest in confidently for the next five years—and I believe Ford is a very sharp outfit. Trouble is, there are more auto factories than the globe needs.
If there is an industry that will be supply-constrained in the next five years, I want to know about it. Seriously! I will happily invest in an ETF that mirrors that industry.
For a fleeting few years, it appeared the commodities were supply-constrained. Now, glutted. By the trillions of dollars money has flowed into energy sectors, financing every good, many so-so, and a lot of dubious ventures. There is no shortage of capital in the energy sector, or other commodities. I see gluts for a long, long time in most commodities. Even ethanol is glutted.
A possible exception to the glut rule is residential real estate in limited geographic areas. As widely noted, the most ardent right-winger becomes an anti-growth, anti-capitalist NIMBY-king in their own neck of the woods.
While commercial real estate markets tend to become glutted anyway, residential markets may be supply constrained. Thus we see West Los Angeles homes and Manhattan condos selling for centi-millions.
The solution to tight residential markets is on the supply-side, but also impossible to implement nationally. Every local government in the United States is beholden to (often wealthy and powerful) homeowner groups.
Yes, any successful economy must invest in infrastructure, plant and equipment, education, and promote work ethics and contractual honesty. These are basics, and we all salute.
But when a global economy appears chronically over-supplied with everything…then the problem is on the demand side.
As I always say, print more money.