Have you got that sinking feeling that the election won’t make much difference and partisan solutions won’t fix the nation’s let alone the world’s severe economic problems? Well if not, you should. The shell game is almost over where governments and banks can keep shifting IOUs around to each other, pretending they can bail each other out of trouble when so many countries and their financial systems drown in red ink and can only print money to shore themselves up.
Any way you look at it global standards of living are going down—and will stay there in long-term economic funk. The latest, most sobering numbers were released a few days ago showing how average family wealth has declined in the U.S. from nearly $130,000 in 2007 to under $80,000 in 2011. Not only has the decline been painfully sharp, but the average American family only has a five-figure cushion in savings and assets--$80,000 won’t take you very far when pensions are evaporating and technology continues to kill off more jobs than it creates. Of course, for most Americans wages are not increasing, and in many cases people are making (a lot) less. The top 10% continue to cream most of the gains, according to the latest statistics, but that cannot continue either when economic underpinnings rot out beneath the most affluent.
So if governments have sunk themselves in debt and most folks in the richest country in the world suffer through wealth evaporation where is the demand coming from to stoke business growth and more hiring, especially when many businesses seem to remain (for now) profitable using fewer workers and shaving benefits? Will the housing market suddenly rebound under these circumstances? Will people find health care more affordable when the Supreme Court strikes down Obama’s healthcare law by the end of the month?
And if governments go into austerity mode (as opposed to printing more money or going deeper into hock) that puts less money into the system and cuts more jobs both public (teachers, cops, etc.) and private (road contractors, defense workers). As demand slackens, private companies will be forced to reduce work forces or do we really think tax cuts will stay out of business owners’ pockets and go into hiring given the demand constraints?
The other choice is to inflate our way out of debt, which devalues existing assets. It appears you have more, but whatever you have buys less. What a mess.
The unraveling continues—Greece appears ready to abandon the Euro. Spain and Italy can’t cope with their much larger debt loads. The cross- collateralized global financial system is twisted in knots over its IOUs without enough cash to deliver bailouts to these countries. Or will you take another U.S. Treasury guarantee—how many trillions are we already in the hole?
Effectively, the world is bankrupt and needs to undergo a massive reorganization. There’s no way out, and we will all be poorer for it. The political blather, meanwhile, seems increasingly ludicrous and beside the point. Leaders and bankers tried extend and pretend, but it won’t work. It’s over.
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Jonathan D. Miller
A marketing communication strategist who turned to real estate analysis, Jonathan D. Miller is a foremost interpreter of 21st citistate futures – cities and suburbs alike – seen through the lens of lifestyles and market realities. For more than 20 years (1992-2013), Miller authored Emerging Trends in Real Estate, the leading commercial real estate industry outlook report, published annually by PricewaterhouseCoopers and the Urban Land Institute (ULI). He has lectures frequently on trends in real estate, including the future of America's major 24-hour urban centers and sprawling suburbs. He also has been author of ULI’s annual forecasts on infrastructure and its What’s Next? series of forecasts. On a weekly basis, he writes the Trendczar blog for GlobeStreet.com, the real estate news website. Outside his published forecasting work, Miller is a prominent communications/institutional investor-marketing strategist and partner in Miller Ryan LLC, helping corporate clients develop and execute branding and communications programs. He led the re-branding of GMAC Commercial Mortgage to Capmark Financial Group Inc. and he was part of the management team that helped build Equitable Real Estate Investment Management, Inc. (subsequently Lend Lease Real Estate Investments, Inc.) into the leading real estate advisor to pension funds and other real institutional investors. He joined the Equitable Life Assurance Society of the U.S. in 1981, moving to Equitable Real Estate in 1984 as head of Corporate/Marketing Communications. In the 1980's he managed relations for several of the country's most prominent real estate developments including New York's Trump Tower and the Equitable Center. Earlier in his career, Miller was a reporter for Gannett Newspapers. He is a member of the Citistates Group and a board member of NYC Outward Bound Schools and the Center for Employment Opportunities.
