Fact and Opinion Economics otherwise known as FAO Economics is Robert Brusca’s Consulting firm that focuses on economics and policy. I look at policy and options through the lens of economics not politics- my affiliation is nonaligned.

At this moment in history I believe policy and economics are giving too much weight to old theory and not enough to new global dynamics. Population aging, globalization and technology are not just bending the rules, they are changing the game and central banks appear to be left behind.  Technology is neither good nor bad but simply ‘is.’ And its existence right now is slanted toward labor-saving impacts at a time that high income countries already are experiencing a high degree of competition from developing low-income competitor nations. The result as you might expect is displacement of the higher wage worker in the more developed economy, a dropping out of disaffected former workers, and downward pressure on wages. In the US this ‘shows up’ as low unemployment and weak wage growth – odd bedfellows to the Fed.  But with a bloated slug of not people working and not unemployed in the general population the result is not an oxymoron. The Fed seems to be looking for answers in demographics but I see the problem as technology and globalization – severe competition from the rank and file worker and for some rather skilled workers as well.   If the Fed keeps looking in the wrong place it will continue coming to the wrong conclusion and that will have repercussions.

I encourage new thinking on the subject of what’s wrong.  I think the Fed is surrounded with too much ‘old thinking.’ The ECB may be guilty of that too, but Mario Draghi has been swimming strongly against the current of old thinking. Japan is struggling against the worst demographics and the highest debt load in the G7. The UK faces all the perils of the modern world plus Brexit and largely unknown knock on effects. Monetary policy there is dealing with its self-created inflation backlash. China has slowed down and it is out of its miracle stage. It now has a huge debt burden, a real environmental mess to mop up (oh yes it supports the Paris accord- a bit late for that one eh?)  and for the first time it is truly vulnerable to policy miss-steps…and it has chosen this moment in time for a political crackdown and to re-endorse communism.  It has is one ticking demographic time bomb as the population ages and the male/female imbalance moves out on the aging curve. The economic cycle is about to get much more interesting for everyone.