Wall Street is having a typical bear market. Stocks are down about 20%. There is an ongoing effort to re-test the lows.
But all the data is pointing to growth. Inflation is declining. Companies are hiring. While a recession is still possible, it’s probably priced into most stocks.
The biggest problem is that we’re an outlier. China is falling. Europe has fallen. Developing markets have ceased developing. If anything, the dollar is too strong. It means we’re importing deflation, but we’re exporting inflation. The U.S. is the world’s unquestioned economic leader, and even if things were a bit worse, they’d be pretty good.
So why are people like Robert Kiyasaki and Michael Burry predicting doom? Two reasons.
First, politics. If you think economics is a zero-sum game you’re scared right now. If your politics depends on economic failure that’s what you must predict. We’ve had several “failures” in the last two years. We were locked down. Then there were supply chain issues. Then there were airport tangles. Then there was inflation. Then came higher interest rates. Fear of job loss, and of housing unaffordability.
It’s easy to predict doom based on any of these facts if you’re interested in spreading it. But the global economy is bigger than that, and everything in it is interdependent. If interest rates are rising, savers can get a return. If mortgage costs are going up, housing prices are coming down, and speculators are being chased out.
Second, technology. It’s amazing how fast the economy can adjust using cutting-edge technology. Moore’s Law is naturally deflationary. This has been true for over a half-century, yet people still underestimate it.
It’s true that some of our current technology is garbage. Blockchain and crypto are garbage. A lot of AI applications are garbage. The metaverse is, so far, mostly garbage. But the capabilities of garbage technology can be made the heart of valuable applications. I saw it in a home shopping service I worked on that became an Electronic Data Interchange format. I saw it in the mapping CD-ROM I worked on, which became a standard for defining location. Let people make lemonade from today’s lemons. I guarantee some of it will taste good.
Clouds and devices are enabling the most stupendous period of change in the history of mankind. Whether mankind is saved will be a close-run thing, but we only have a chance because of the tools I have spent my life covering.
That’s why I remain an optimist.
