Saturday, January 26, 2013

Sneaky Trends and Dystopian Ideals

Are we ready to face the realities of slow growth? No, we're not. To be ready for something you have to prepare for that something prior to it occurring.
Two trends have snuck up on us – slower long-term economic growth and an aging society.
I guess you don't read my blog, nor were you reading my Hellberta blog, nor the Facebook group I was running before that. The trend of slowing growth and an aging population has been developing for sometime in extremely obvious ways. Now that we're heading into the depths of the end of growth it would seem those who chose to ignore the obvious signs finds this "sneaky".

These trends didn't sneak up on us, you sir have simply chosen to ignore them preferring instead to believe in Canada's "strong, stable, economy".
This week, the Bank of Canada published economic growth estimates. The bank said economic growth in 2012, when all is accounted for, will be 1.9 per cent, followed by 2 per cent in 2013 and 2.7 per cent in 2014. If correct (and predictions are usually proven at least slightly wrong), that would mean an average growth rate of 2.2 per cent over these three years.

Per year, the difference between 2 and 3 per cent growth doesn’t seem like much. Add it up, year after year, and the gap is telling. More important, most of the long-term forecasting suggests that for the rest of this decade, growth will be slower than what we knew before the financial recession of 2008.
The author is starting to catch on to the illusion exponential growth creates. "2 and 3 per cent growth doesn’t seem like much", the key here is it is a percentage based on the previous growth. "2 or 3 percent" year over year equates to an ever larger amount, think compound interest. The year's growth includes itself in the economic base of the next year meaning even more growth must occur to reattain the 2 or 3 percent growth.

We're looking for an increase in the percentage while ignoring the fact that year over year that simple 2% represents an ever larger economic value. From this point of view growth hasn't actually slowed at all it's still speeding up but the unit of measurement (especially when you consider much of our base growth levels have now been generated by banking fraud) is exceeding the physical possibilities of growth itself.

Our virtual, fiat, "financial services" economy has pushed growth levels far beyond real growth. Real growth is a spec of dust now in the shadow of the banking sector. If you want to understand the source of inequality between the 1% and everyone else all you have to do is look at their sources of income. The upper 1% gets the majority of their income not from jobs but from investments or market trading while the lower 99% relies on the real productive economy. You, the 99%, have to go to work everyday, expend energy, and produce something or service something. The 1% largely brings in cash produced out of thin air, of course it's not only the 1%: for instance, we have a natural obsession with believing somehow our homes are generating value, that the $100000 many home flippers were bringing in was actually produced somewhere, it wasn't. Your house isn't creating value in any way, shape, or form, it is only perceived to increase in value usually resulting in collapsing housing bubbles as the lack of real growth quickly prices people out of the over valued market.
The effects of slower growth will be twofold. First, government revenues will grow less rapidly than before, assuming no changes in tax rates. Second, some government expenditures will increase with slower growth, especially since slower growth means stubbornly high unemployment. The double-whammy will pinch government budgets, which are already strained by deficits, except in Saskatchewan.
Except Saskatchewan? Right... What he is describing here is the "downward recovery" I've been telling you about. Peak oil and extremely expensive energy ensures the real economy is more expensive while there is less disposable income available from the real economy to feed the fiat financial service ponzi scheme. If you're about to tell me that fracking proves there's no peak oil then you need to restudy (or perhaps start studying) the concept of energy returned on energy invested. The market value of this new shale oil is reflective of the rush to this new market and the resulting glut, not representative of the actual cost to produce shale oil.
But for now, it would appear that the already hard challenges of governing will become even harder in an age of constrained resources.
Yes, it will. There's going to be more protests, more riots, and an ever-increasingly brutal police response. This civil unrest is going to compound the already dismal economic situation. Greece is the canary in the coal mine, a preview of events to come.

We're not ready for this slowdown in growth at all, few even have a basic understanding or grasp of what it all really means. We're still in denial, and it's really going to hurt. The G20 was the training for the response that will be coming from the government when Canadians finally figure this all out.


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Richard Fantin is a self-taught software developer who has mostly throughout his career focused on financial applications and high frequency trading. He currently works for eQube gaming systems.

Nazayh Zanidean is a Project Coordinator for a mid-sized construction contractor in Calgary, Alberta. He enjoys writing as a hobby on topics that include foreign policy, international human rights, security and systemic media bias.

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