See the trends shaping our future. Be forewarned, so you can prepare.

By / 5 Comments / 25 December 2015

Summary: We cannot reliably see the future. Every decade begins with confident forecasts, usually proven wrong. Too many variables, too many complex dynamics interacting. But we can examine individual trends, the usual work of the FM website. Here we pull together the threads, a mixture of challenges and opportunities that loom over the next ten years. In the comments list the trends you see at work!

Key to bright future
Today we give you a keyhole through which to see the future

Contents

  1. Climate change
  2. Demographics: the age wave
  3. The Debt Supercycle
  4. The new world of work
  5. The great monetary experiment
  6. The results of a low-investment nation
  7. Will growth continue to slow?
  8. Oil prices and new technology
  9. The next industrial revolution
  10. Implications of a tech singularity
  11. There will be war

(1)  Climate change

To see what is coming, I recommend relying on the IPCC’s probability ranges instead of alarmists’ certainties. Remember the uncertainties: the uncertainties in climate science, in the models that make the predictions, in technology (see below), and in the unknowable future public policy responses to climate scientists’ warnings.

The pause in surface temperature warming of the past decade has astonished climate scientists. Now they analyze its causes and forecast its duration. The public policy response might depend on answers to these questions, as the activists’ current strategy of attributing every form of normal weather to increased CO2 — despite the pause in the atmosphere’s warming — might not work if continued through the next decade. And who can say if the next decade will hold equal surprises?

I recommend reading the important things to know about climate change. See all posts about climate change.

(2)  Demographics: the age wave

The coming crash of US consumer spending as Boomers retire with high levels of debt, low savings, and small pension incomes. Experts have warned about this for decades, yet it will catch us by surprise.

Also we’ll confront the consequences, after so many warnings, of underfunded pension plans. Both public plans (see articles by Bloomberg and by CNBC and private plans (see this by Fitch).

(3)  The Debt Supercycle

Road To The Future

The dynamics of what Hamilton Bolton and Tony Boeckh of Bank Credit Analyst so long ago christened The Debt Supercycle, probably now entering its final stage. See the posts about it here.

It’s not just the burden of servicing the debt, and the eventual drag of repayment. An additional problem is the decreasing marginal elasticity of GDP with respect to debt, first identified in the mid-1980s by Maria Fiorini Ramirez (then an economist at Drexel). How much does GDP rise from an injection of another dollar of debt? This, the marginal impact of debt, has been dropping since WW2. The post-WW2 era will have ended when it reaches zero (which it might already have).

(4)  The new world of work

The structural change in jobs, as the corporations’ perfect a combination of operational methods and technology to reduce wages and prevent unionization, creating a model of an outsourced, part-time, contingent, no-benefits workforce that spreads through the US economy.

  1. For Thanksgiving, Walmart shows us the New America, 19 November 2013
  2. Nike swooshs us into a future of fewer jobs, low pay, 10 March 2014

(5)  The great monetary experiment

The result of the great monetary experiment being conducted by the great nations, extended periods of zero-interest rates (ZIRP) and QE. If these are successfully concluded, future central bank policies will have discontinuity with the before-crash era. Zero rates, monetary stimulus, and QE will be used faster and bigger, with results we can today only imagine.

See all posts about the great monetary experiment.

Seeing the future
Ron Chapple/Getty Images

(6)  The results of a low-investment nation

After thirty years of slowing rates of investment by both the public and private sectors we have a decaying public infrastructure and slowing economy.

  1. Why America’s growth is slowing, and a solution, 28 January 2013
  2. Portraits of a nation in decline. An unnecessary and easily fixed decline., 14 February 2013
  3. Four graphs showing a nation in decline. An unnecessary and easily fixed decline., 1 November 2013
  4. Watch corporations strip-mine their future (and ours), 18 April 2014

Special attention should be paid to the new Triangle Trade: Options to Stocks to Buybacks, funneling much of US corporations resources (not just free cash flow, but also borrowing) to senior executives (for many corporations, large and long-term stock buyback programs are offset by options issued to executives, so outstanding shares do not drop.  See Factset’s quarterly reports).

(7)  Will economic growth continue to slow?

Will the developed nations experience a falling long-term growth rate, especially ugly if there is such a things as a “stall speed” (a growth rate below which a recession becomes far more likely)? Or worse, what if we have a rising stall speed as the developed nations accumulate more debt.

  1. Has America grown old, and can no longer grow? Or are wonders like the singularity in our future?, 28 August 2012
  2. The dilemma of the US economy: can’t take off & too close to the brink, 9 July 2014
  3. Has America’s economy entered the “coffin corner”?, 10 July 2014

(8)  Oil prices and new technology

Since 1970 oil prices have been both volatile and unpredictable. I doubt either will change in the next decade.  The output of existing giant fields — the queens and the King (Ghawar, in Saudi Arabia) — will continue to decline. To what extent will other nations develop shale oil and natural gas production? Some experts question the EIA’s optimistic forecasts for US shale production: natural gas production rising through 2040, shale oil production peaking (with total US oil) aprox 2020.

Equally controversial are forecasts for other factors, such wind and solar electricity production, and the rate at which hybrid and electric cars will gain market share on the roads. The easy guess is that predictions about energy in the next decade will prove no more accurate than those of the past.

For more information see the posts about oil and alternative energy sources here. See links to studies and reports about oil and many other energy sources here.

(9)  The next industrial revolution, already in progress

The past ones provide ample basis – vivid, disturbing lessons – for speculation about the challenges and opportunities they create.  Consider Bat Masterson’s life (1853 – 1921). He saw technological changes on a scale no living American-born person has seen. For contrast, imagine transporting Donna Reed from her 1955 kitchen to its current equivalent; she’d adapt in a day or two.

Our children might see such changes. For details see:

  1. Let us light a candle while we walk, lest we fear what lies ahead.
  2. Ben Bernanke sees the great slowdown in technological progress
  3. All posts about the Third Industrial Revolution, now in progress

Singularity Eye

(10)  Implications of a technological singularity

We have had several singularities, although in prehistory. We might have another in the next generation from one or more of the breakthrough technologies: AI, nanotechnology, genetic engineering, and fusion.

  1. Good news: The Singularity is coming (again), 8 December 2007
  2. The Singularity is in our past, 29 March 2009
  3. Has America grown old, and can no longer grow? Or are wonders like the singularity in our future?, 28 August 2012

(11) There will be war

Since Mao brought 4th generation warfare to maturity in 1950, it’s been the dominate form of war. Often used to bring victory by insurgents, almost always bringing victory when the local government resorts to foreign troops fighting in its defense. Hence America’s repeated defeat in its major wars during the past 50 years. Until a defense is found, 4GW will continue to reshape the world.

  1. Military and strategic theory – and practice
  2. America’s military, and our national defense strategy

5 thoughts on “See the trends shaping our future. Be forewarned, so you can prepare.”

  1. John Slater

    Great post as always Fabius. I would add the explosion of human knowledge and development of non-governmental cross-border networking as the most important outlier. Google, Wikipedia, MOOCs and countless additional sources of knowledge distribution have made it possible for a young genius in Zambia to be exposed to all the world’s knowledge via her smartphone. Where such a young Einstein might have been consigned to having babies and carrying water in an earlier generation, these new tools open up the world. This capability is, at most, five years old. We have not yet seen the consequences of this development on the growth of human knowledge, on the global organization of work, or on the traditional geographical barriers we call nation states, but within the next ten years the impact will be significant, possibly for the better.

    Reply
  2. Duncan Kinder

    You draw a picture that seems much like 17th century Spain. An overstretched empire with an obsolete economy, burdened by debt, fielding a large but increasingly outmoded military.

    But this was also Spain’s Golden Age, a time of great culture. Cervantes and Velasquez are best known by us, but Spain then fielded many major figures revered and enjoyed in the Hispanic world.

    So perhaps we, too, for all the ails described about, could also have a Golden Age. For times of great stress, while causing great pain, can also draw out people’s resources.

    Here’s the link to the Wikipedia article on Spain’s Golden Age:
    http://en.wikipedia.org/wiki/Spanish_Golden_Age

    Reply
  3. slapout9

    Have you seen this? It is where general Petreaus says that America is over! and will be replaced by a North American Union based upon the NAFTA treay. Also talks of the 4 Revolutions shaping our country.

    “After America, what?”, panel event at the Centre for Policy Studies Margaret Thatcher Conference on Liberty, held at the London Guildhall, Wednesday 18th June 2014. Attendees: Hon John Howard, Dr Keyu Jin, General Petraeus. Chair: Professor Michael Clarke.

    .
    [youtube=http://youtu.be/hwHZUR4pcAA]

    Reply
  4. Thomas More

    Intriguingly enough, Duncan Kinder is not the only astute observer to have noticed an eerie similarity twixt early-21st-century America and 17th century Spain. William S. Lind, originator of much of our understanding of fourth generation warfare (4GW), also made the analog in one of his final posts in his classic “On War” series.

    While many junior and field-grade officers in the U.S. military have found value in the Four Generations framework (which says that American armed forces are not one, but two generations behind), the brass studiously ignores it. “Not invented here” is part of the problem, but the larger part is that our major headquarters think little if at all about war. What they think about is money. 4GW does little to justify bigger budgets. On the contrary, it suggests that most “big ticket” weapons programs are irrelevant to where war is going. That is not what the brass, or the defense companies they plan to work for after retirement, want to hear.

    What might change that picture? Nothing will change in DOD until the money simply isn’t there anymore. The news, which is simultaneously good and bad, is that the money soon won’t be there. Like every previous imperial power, we are bankrupting ourselves. A trillion dollars here and a trillion dollars there, and soon it adds up to real money. The twin financing mechanisms of piling up debt and debasing the currency can only go on so long. We can already see the night at the end of the tunnel.

    There is no better way to end this series of columns, at least for a while, than to recommend a book. The best book on where America now stands and where it is going is J. H. Elliott’s The Count-Duke of Olivares: A Statesman in an Age of Decline. Olivares was what we would now call the prime minister of Spain in much of the first half of the 17th century. His era saw Spain go from “the only superpower” to a downward plunge that lasted three centuries. Unusually, the more one looks at the details, the more the parallel holds. Then, as now, the root problem was the same: the court was controlled by interests that lived off the nation’s decay. Consider the book Scrooge’s recommendation for good Christmas reading.

    Source:“Parting thoughts for now,” William S. Lind, “On War” series of posts, archived at the old Defense and the National Interest site.

    Reply

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