Transitory Emasculation?

Following up on our unleash the "economic" Kraken theme in Profits, Presbyterians and The Kraken? and Signs Of Reflation?....

"That would be consistent with the fading effects from Harvey and Irma. Analysis on this account will be further distorted by tax law changes, however, which in Q4 2017 boosted state and local receipts derived from individual income taxes by 14% year-over-year."

Trebek: What is the downside to a massive head fake, or transitory economic condition.

"To many in the so-called establishment, the loss of capacity and really the jobs that would have gone along with it is taken for progress. Low-skilled, low-value employment in manufacturing was replaced by high-value, high-skill opportunities in the 21st century information age economy; or, at least that is what they contend."

Trebek: When one invests in apps and buybacks rather than plants and equipment, what would one expect to happen?

"The middle 2000s, however, wasn't characterized by a substantial boom in IT; quite the opposite, actually. Rather, what replaced manufacturing jobs was one angle of FIRE or another; either in the form of consumer debt largely mortgages, or as jobs selling one kind of financial product to as many people as possible. Take away the debt bubble and what's left is the economy stripped bare to its shrunken industrial base."

Imagine an emasculated service based FIRE economy, exchanging photos, recipes, videos, streaming programming, ordering foreign made goods online, referencing online encyclopedias, fake news, and social media twittering.... 

None of which really do much for overall productivity and output. Perhaps FANG+ network driven tech monopolies are just beginning to suffer a long overdue price adjustment?

"The supply side has been a drag on economic growth going back to the turn of the 21st century. It was at that point Ross Perot's "giant sucking sound" was finally mobilized, and US industrial capacity was outsourced overseas. The economy of the middle 2000's obscured the deficiency to a considerable degree. That's in many ways what is at issue today, including in academic and policy debates."

As the long term empirical evidence is overwhelming, there is no debate. Ross Perot and Sir James Goldsmith were right, and the chickens are just coming home to roost.  Unfortunately, most have forgotten…

"the purpose of the economy is to serve society, not the other way round. A successful economy increases wages, employment and social stability. Reducing wages is a sign of failure. There is no glory in competing in a worldwide race to lower the standard of living of one's own nation."  – Sir James Goldsmith

Coming full circle in our theme, and now this from 1992 Ross Perot...

Recommended Reading: Did China Really Win, or Did Everyone Lose? - Jeffrey Snider