1/ The unaffordability crisis for younger generations and the rising National Security vulnerabilities of the US are not accidents. They are the direct result of systemic Decisions made over the last 25 years.
Welcome to Part II of Demographics, Decisions, & Destiny. 🧵👇
2/ Around 2000, as the Boomer generation entered into Power, a massive mindset shift occurred. The focus shifted away from collective, abundance, and the long-term, toward selfish, scarcity, and short-termism.
Simplistically: As Boomers became Capital, Capital was favored, and Labor was subverted
Simplistically: As Boomers became Capital, Capital was favored, and Labor was subverted
3/ While both Labor and Capital were growing linearly and generally in sync from the 1970s through ~2000, a massive divergence began from 2000+
Capital growth began expanding much faster than Labor
Capital growth began expanding much faster than Labor
4/ How was Labor crushed? A multi-pronged attack.
First: China WTO/MFN. China's 2001 WTO entrance flooded the global market with cheap labor. This created massive incentives for corporate execs to offshore Productive Capacity to boost margins and increase Capital efficiency
First: China WTO/MFN. China's 2001 WTO entrance flooded the global market with cheap labor. This created massive incentives for corporate execs to offshore Productive Capacity to boost margins and increase Capital efficiency
5/ Second: The Federal Reserve. A fear-driven policy actively suppressed US wage growth below inflation to allegedly avoid a wage-price spiral.
Janet Yellen explicitly noted that "fear of job loss" was useful to lower wage demands and prevent worker backlash
Janet Yellen explicitly noted that "fear of job loss" was useful to lower wage demands and prevent worker backlash
6/ Meanwhile, Capital was actively inflated.
The 1993 tax changes pushed executives into stock-based compensation, and subsequent Capital Gains tax cuts made that stock immensely profitable. The critical link between value creation (Labor) and value capture (Capital) was severed
The 1993 tax changes pushed executives into stock-based compensation, and subsequent Capital Gains tax cuts made that stock immensely profitable. The critical link between value creation (Labor) and value capture (Capital) was severed
7/ This massive shift was driven by centralized, unelected, and unaccountable power.
The destruction of the feedback loop destroyed the integrity of the System. Poor decisions by the few impacted the many, with absolutely no accountability for the degradation of the Money Pillar
The destruction of the feedback loop destroyed the integrity of the System. Poor decisions by the few impacted the many, with absolutely no accountability for the degradation of the Money Pillar
8/ When the housing bubble popped in 2008, those in power chose to save Capital at the expense of Labor.
Socialism for the rich, capitalism for the poor. Taxpayer money funded bank bailouts, while Main Street was left with inflation. ZIRP and QE became permanent tools to intentionally inflate asset prices
Socialism for the rich, capitalism for the poor. Taxpayer money funded bank bailouts, while Main Street was left with inflation. ZIRP and QE became permanent tools to intentionally inflate asset prices
9/ The Demographic impact was devastating. Money printing increases the "entrance fee" into the System.
By intentionally inflating Capital assets like homes, these Policies effectively denied the rising Productive Labor Force (Millennials) entrance into the System
By intentionally inflating Capital assets like homes, these Policies effectively denied the rising Productive Labor Force (Millennials) entrance into the System
10/ Instead of empowering the young, Policies actively deterred family formation.
Things that couldn't be offshored - housing, childcare, healthcare, college - saw massive price inflation. The youth became heavily indebted.
Things that couldn't be offshored - housing, childcare, healthcare, college - saw massive price inflation. The youth became heavily indebted.
11/ And thus, despite the echo boom coming into family formation years, family formations dropped. Fertility dropped. Home ownership dropped.
Without families there are no kids. Without kids, there is no future...
Without families there are no kids. Without kids, there is no future...
12/ Further, by systematically favoring 'bits' (Capital/IP) over 'atoms' (Labor/Manufacturing), the US severely weakened its Pillars of Power.
While the US printed digital money to buy paper assets, China used those dollars to build physical Critical Product capacity
While the US printed digital money to buy paper assets, China used those dollars to build physical Critical Product capacity
13/ We shipped our Critical Product manufacturing to our primary adversary, creating massive chokepoints and National Security vulnerabilities.
We blindly chose efficiency over resilience, expanding external dependence - like Taiwan for over 90% of leading-edge Semiconductors
We blindly chose efficiency over resilience, expanding external dependence - like Taiwan for over 90% of leading-edge Semiconductors
14/ It was clear by 2015 China was not going to play by the rules of the System.
Right as Xi took power, China stopped buying US treasuries and laid out a clear Made in China by 2025 plan.
Right as Xi took power, China stopped buying US treasuries and laid out a clear Made in China by 2025 plan.
15/ With that very clear clustering of signals, surely those in power in the US second guessed shipping our Technology, Productive Capacity, and Labor overseas – including Critical Products?
Nope. Accelerated sale of Semiconductor assets to China, and pillaged the System
Nope. Accelerated sale of Semiconductor assets to China, and pillaged the System
16/ Then came the 2020 COVID response. While the public bailed out the banks in 2008, the Federal Reserve bailed out the Government in 2020.
US Federal Debt to GDP skyrocketed from ~100% to 130% overnight. The era of Fiscal Dominance and the debt-doom-loop began
US Federal Debt to GDP skyrocketed from ~100% to 130% overnight. The era of Fiscal Dominance and the debt-doom-loop began
17/ Capital flowed to those already with Capital - highly unproductive flows, hence the explosion in debt/GDP.
Instead of flowing toward the Productive Labor Force & Productive Capacity - which historically has always proven to be the intelligent place to invest..
Instead of flowing toward the Productive Labor Force & Productive Capacity - which historically has always proven to be the intelligent place to invest..
18/ The output of 25 years of printing Money to inflate Capital is the Unsustainably Imbalanced System.
This printed money didn't go to productive uses; it went to those who already had Capital. This regressive policy actively exacerbated extreme wealth concentration and polarity
This printed money didn't go to productive uses; it went to those who already had Capital. This regressive policy actively exacerbated extreme wealth concentration and polarity
19/ The output of the Policies - Labor could not afford to buy houses, form families, and have kids... so they didn't
Those in power chose to actively enrich themselves at the expense of the majority, at the expense of the future.
Those in power chose to actively enrich themselves at the expense of the majority, at the expense of the future.
20/ And thus the pendulums that are observably at extremes that we see today
Any great power that spends more on the old than on the young risks ceasing to be a great power.
Any great power that spends more on the old than on the young risks ceasing to be a great power.
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