For those of you who read my columns regularly, you've probably noticed that I usually refer to earlier columns on a related subject for context. The study of macroeconomics is all about the relationships and interactions of everything going on in the world. Specific to my columns is the extension of those observations to how these interactions are likely to be reflected in the capital markets over time and where the opportunities to allocate speculative and investment capital are, as well as the risks to the same. This is not a simple additive process of recently passed events, however. They are all a part of what is known as the global metanarrative -- the secular and or structural issues that are common to all of humanity.
Four dominant issues drive human interaction in the world today; put together, they constitute the global metanarrative. They are energy, technology, demographics and debt. Although each issue is distinct and the study of them can be esoteric, each has general themes and the way they interact is critically important for all growth speculators and income investors to be aware of.
One difficulty is that very few people are aware of the connections between these four issues. They are typically studied independent of one another by experts in associated fields, similar to the way there are specialists in all fields. The traditional route to financial success for an individual or organization is to specialize in some particular area, become better at it than most, then make consumers aware of that expertise. The result is that technologists understand their fields, but they are probably not aware of where the money is coming from to pay for it.
Economists understand the macroeconomic condition best and how it correlates to the cost of capital, but without a good understanding of who's accessing the inexpensive debt capital and why. Energy, especially oil, has traditionally been considered globally ubiquitous, involving the energy industry and government taxing schemes. Demographics are studied by sociologists and social engineers but are also largely considered under the providence of government policy. The key to understanding the metanarrative and what it implies for the trajectories of economies, capital markets and humanity requires an understanding of all these issues and how they relate to one another.
On the energy front, the entire world -- developed and developing -- is in the nascent stages of experiencing and becoming aware of what is known as uneconomic growth. In short, uneconomic growth is caused by the cost of natural resources (most importantly oil and its distillate fuels for internal combustion engines) to become too expensive for economies to afford. The era of cheap, economic oil has ended, along with all of the economic and political constructs that have been built up around it since the mid-19th century. The era of alternative and renewable energy sources has begun, and it is going to radically change all human interaction over the next generation.
On the technology front, for the first time in human history technology is beginning to displace and replace human labor as an input to the economy. That means technology is now in the nascent stages of destroying more "jobs" for human beings than it creates. This too is going to radically change the way human beings interact and relate to each other through their collective organizations.
I've written multiple columns on various aspects of demographics over the past several years, but as it pertains to the metanarrative, the principal issue is that the world is aging and bringing with it substantial changes to the viability of consumer-driven economic models that are prevalent everywhere now.
All three of these areas are increasingly presenting monetary and fiscal policy makers around the world with a confluence of events that are causing questions to be raised about the viability of traditional counter-cyclical measures to be enacted in response to high energy prices, demographic drag and technology displacing human labor.
Although I've written numerous columns about debt being accumulated by both sovereigns and the private sector and the implications of it growing faster than real economic activity, it hasn't become a concern for economists and policy makers until recently. That appears to be changing as the observations concerning global debt levels, both public and private, offered in the Geneva Report makes clear. In my next column, I'll relate the observations offered in that report to those I've discussed in the past with respect to sovereign debt levels, private debt levels, and monetary and fiscal policies globally, as well as what they indicate about the immediate future.