A Lifetime Ago…
While it may seem like ancient history to think about now, for a long time it was a lack of inflation that dominated the financial and economic news. For years the Fed struggled to achieve its inflation targets. I don’t think it’s controversial to say that this largely deflationary (or stagflationary, depending on which economist you ask) impact was the result of globalization.
Back in the mid-2000s heyday of globalization, the IMF published an interesting report on its deflationary effects (you can read it here).
Anyway, globalization is certainly not over as a mega-trend, but its golden days may be behind it. Geopolitical tensions and the memory of post-COVID supply shortages have prompted many countries and companies to re-think the just-in-time, Earth-spanning supply chains and spurred a new wave of nearshoring.
What could prompt a new round of deflation in the economy? Well, if you ask Vinod Khosla (an OpenAI investor), artificial intelligence will.
While I’m generally skeptical of AI and the snake oil promises of its various evangelists, there’s no doubt that the future for the technology is going to be huge. AI, for example, has already allowed scientists to make massive leaps forward in various pursuits (Google’s AlphaFold, for example). It’s not that much of a stretch to think that an AI application could also reduce your phone bill in the future.
It’s interesting, at least as a thought experiment, to wonder at how deflationary AI could be. After all, the scars of globalization are all around us, especially in the United States (consider the plight of Rust Belt and other former U.S. manufacturing powerhouse regions). The cost of falling phone bills and insurance prices were, at the end of the day, people’s jobs.
AI’s impact on the economic landscape is not likely to be that different. The only question is, how bad the scars will be. What sort of workforce displacement will we see? One thing seems certain, however: this time it won’t be just auto plant workers that are affected.
Looking back at the previous bout of deflation as well as the impact it had on the world economy might provide some interesting insight into how the world will navigate this next round, should it come,
Some Other Things…
Here are a few of (what I could consider to be) the more interesting Market Beat posts from 2023. I’m looking forward to 2024, and I wish you and yours a happy new year!
Lastly, here’s the writeup I did on Carriage Services CSV 0.00%↑, the funeral services provider. Stock is up 10% since the writing, and still worth a look!
Disclaimer: The content in this article is for informational, educational, and entertainment purposes only. This content is not investment advice and individuals should conduct their own due diligence before investing. The author is not suggesting any investment recommendations. This article is not an investment research report but a reflection of the author’s opinion and own investment decisions based on the author’s best judgement at the time of writing and are subject to change without notice. The author does not provide personal or individualized investment advice or information tailored to the needs of any particular reader. Readers are responsible for their own investment decisions and should consult with their financial advisor before making any investment decisions. No statement or expression of opinion, or any other matter herein, directly or indirectly, is an offer or the solicitation of an offer to buy or sell the securities or financial instruments mentioned. Any projections, market outlooks, or estimates herein are forward looking statements based upon certain assumptions that should not be construed as indicative of actual events that will occur. Any analysis presented is based on incomplete information, and is limited in scope and accuracy. The information and data in this article are obtained from sources believed to be reliable, but their accuracy and completeness are not guaranteed. The author expressly disclaims all liability for errors and omissions in the service and for the use or interpretation by others of information contained herein.
Love the topic.
I think there's an error or two in this statement:
"I don’t think it’s uncontroversial to say that this largely deflationary (or stagflationary, depending on which economist you ask) was the result of globalization."
Double negative at the start? (don't think it's uncontroversial).
Around the parenthesis, sentence reads "largely deflationary... was the result". Perhaps meant to say deflationary impact? Not sure.
After edit, feel free to delete this comment. Not my goal to leave a "hey, I found a typo" message. Figured this is probably the quickest way to reach you though.