Two contrasting viewpoints:
Pessimistic: The Truly New Year
Optimistic: Financial Fridays: The Stock Market is Bullshit
New inventions and technologies would outpace the demand for those commodities so that as we needed their functionality more, the prices would fall.
Think about computers: your price per speed and functionality in your computer has gone down every year since they’ve been invented.
ANOTHER GREAT EXAMPLE OF INNOVATION AND DEFLATION
Think about lighting your house. In the 1880s you would have to work for 15 minutes to pay for an hour of kerosene lamp usage.
Today you have to work for 1/2 a second to get an hour of reading light.
Ditto for cars. For clothing (as a percentage of your income) and even for food (as a percentage of your income – food costs have gone from about 20% of your income in 1969 to about 3% of your income. )
This is similar to the ‘utility‘ argument as a way to mitigate wealth inequality and real wage stagnation.
Of the two, my money is on the latter, not only because I agree the China fears are overblown, but the odds suggest the doom and gloom hype will pass, as it 95-99% of the time always does.
Here are some past examples of doom and gloom that passed:
Debt ceiling, sequester, fiscal cliff (all these passed without much incident)
Banking crisis relapse (six years later still no relapse; bank balance sheet are healthier than ever)
Fears of double dip recession & bear market (since 2009, six years later, still no recession or bear market; growth is slow, but still positive)
Ebola (came and went, as it always does, although the death toll was higher than usual)
Greece global contagion 2010-2012 (Greece never left Euro, no global economic contagion)
Fears of hyperinflation & dollar collapse (treasury yields at new lows; dollar at record highs)
‘China is slowing’ (isn’t it always?)
Euro collapse (hasn’t happened, probably won’t)
Oil prices out of control in 2008, ‘peak oil’ (oil now at near decade lows)
Wealth inequality is too high (there is little or no substantive evidence rising wealth inequality is bar for the economy will eventually pose threat to economy)
Tech 2.0 bubble (tech valuations are not nearly as high as they were in 2000)
Housing market double dip (prices keep going up, mortgage lending standards have become more stringent, subprime lending at record lows)
Russia (after a lot of headlines in early 2014, no one talks about it much any more)
Democracy is in danger/voter fatigue (ptth people are actually tired of it)
Predictions of a housing market bubble 2005-2008 (the ONE time the doom and gloom media was right…out many examples of being wrong. Had you heeded the media and sold your stocks in 2005-2008, you may have been able to buy at a much lower price in 2009.)
So what does the future hold? Who knows, but it probably won’t be as bad as many are expecting.