Repeat of the 1880s?

[Mr._Graybeard]

As a history buff I see parallels between the times we live in today and the decades after the Civil War. Back then the country had nearly inconceivable potential for expansion on many fronts. The growth rate in productivity was so great, though, that it pushed the country into an extended period of deflation that reached to the 20th century. There were just too many bushels of wheat, tons of coal and man-hours on the market chasing too few available dollars.

Politically the effect can be seen in the rise of the Greenback Party and the free-silver movement. Socially, it's notable that some of the most celebrated individuals of the period were gunmen.

In our globally integrated economy, the dot-com boom sent the economy soaring, just like the Civil War did in the northern states. The Internet connected the world like the railroads opened up the West. And the modernization of economies in China, India, and Korea have flooded the world economy with cheap labor like the waves of European immigration (and slave emancipation) fed the labor market in 19th-century America.

If the pattern fits, and history repeats itself, we may be in for some "interesting times."

 

[AnIntentionalRoad]

Like what? A fabricated reason to go to war with Spain? Oh, I guess we already had that in Iraq.

Sent from my SM-T237P using Early Retirement Forum mobile app

 

[Mr._Graybeard]

Like extended low-inflation rates, for one thing. Perhaps civil unrest as people find it hard to get ahead. A rising anti-immigrant mood

One phenomenon of the period in the 1800s was that wealth became concentrated in a small share of the population (Mark Twain called it The Gilded Age, alluding to the country's thin veneer of wealth on the surface).

 

[tmm99]

Like extended low-inflation rates, for one thing. Perhaps civil unrest as people find it hard to get ahead. A rising anti-immigrant mood

One phenomenon of the period in the 1800s was that wealth became concentrated in a small share of the population (Mark Twain called it The Gilded Age, alluding to the country's thin veneer of wealth on the surface).

Wow. Tell me more.


Sent from my iPad using Early Retirement Forum

 

[marko]

Wow. Tell me more.


Sent from my iPad using Early Retirement Forum

Me too! I've thought about this myself recently. Thinking about how the so-called 1% are living in a Gatsby-esque era.

My grandparents used to say "well, he was incredibly rich BEFORE INCOME TAXES, now he's just very rich".

They used to say that a lot "...before income taxes...." which they used as a time reference; the 1880's to 1915 or so.

 

[marko]

Like what? A fabricated reason to go to war with Spain? Oh, I guess we already had that in Iraq.

Sent from my SM-T237P using Early Retirement Forum mobile app

I think you're confirming Graybeard's thesis.

 

[M Paquette]

I'm eagerly awaiting Mr. Twain's new book, myself. And how about them Clanton brothers? Damn!

 

[easysurfer]

automobile/driver less automobile. I see the similarity.

 

[HFWR]

automobile/driver less automobile. I see the similarity.

Not so fast...

Google self-driving car involved in first injury accident | Fox News

But then there's this...

Tesla Offers New ‘Ludicrous Mode’: Zero to 60 in 2.8 Seconds - Bloomberg Business

 

[Totoro]

Not so fast...

Google self-driving car involved in first injury accident | Fox News

"The first car slowed to a stop so as not to block the intersection — traffic on the far side was not moving. The Google car and the other car in front of it also stopped

Within about a second, a fourth vehicle rear-ended the Google car at about 17 mph. On-board sensors showed the other car did not brake."


Haven't seen an at fault Google incident as of yet (in driverless mode). Incredible if you ask me.

 

[NW-Bound]

Tesla Offers New 'Ludicrous Mode': Zero to 60 in 2.8 Seconds - Bloomberg Business

And that makes the Tesla car "green" and worthy of tax subsidy?

I read the article, and they got that impressive acceleration by drawing 1500 A from the battery pack, which means 20 A through each of these 18650-sized Panasonic batteries (the current is divided through 74 parallel paths). This current is well within the specs of each battery. Of course there are other limitations in the system that were tough to overcome, but this demonstrates the wonderfulness of the Lithium Ion battery.

 

[MichaelB]

But then there's this...

Tesla Offers New ‘LudicrousÂ*Mode’: ZeroÂ*to 60 in 2.8 Seconds - Bloomberg Business

Ludicrous Mode? That's straight out of Space Balls

 

[Mr._Graybeard]

I'm eagerly awaiting Mr. Twain's new book, myself. And how about them Clanton brothers? Damn!

Interesting thing about the Clantons. They and the rest of the rural "cowboy" crowd around Tombstone leaned Democratic while the Earps and the merchant class of the city were largely Republican in their sympathies. Party politics were definitely a factor in their rivalry, and politics could get a little heated back then.

 

[Totoro]

.. maybe back on topic .. is productivity in the US still improving? Might be different than 1880s.

I thought it was stagnating (in the UK it is for sure, Germany also I think).

 

[MichaelB]

Partisan politics of the 1800's cowboys? Let's not go there - it has nothing to do with FIRE.

 

[NW-Bound]

...There were just too many bushels of wheat, tons of coal and man-hours on the market chasing too few available dollars...

I do not know much about the 1880 era, but we do seem to have a surplus of commodities now. Oil is suddenly cheap again. Industrial metals such as steel and copper are abundant again due to more mines opening up when demand drove prices sky high in the mid 2000s.

I just read that pig farms in Denmark are having a hard time because they get only 1.40 euros/kilo, and need 1.70 euros to break even. Here in the US, there's overproduction of milk, and they just dump it in manure pits. A few years ago, several European countries had a wine glut, in which the vintners had to sell for a dime a liter to distill into ethanol to burn in cars. There was also a wine glut in Australia, South America, and South Africa, and the common solution was to let the vines die and cut production. Coffee is getting cheap again too.

I guess it's tough to make money when in the developed world we have more than we can consume. What people still want are not necessities like food, water, roof over the head, basic transportation but fluffs like new iPhones, fast cars, wonder drugs that promise to let them live till 100. There are still places on earth where people are hungry, but these miserable folks have no way to pay for the food that we overproduce.

When commodities are cheap, if a retiree keeps his taste simple his life will not be hard. I am OK with that.

 

[Mulligan]

I never really thought of it in terms of relating to a previous historical era. But my primitive working/investment thesis has been tied to technology keeping the lid on inflation. I have been reaching for as high and as safe of yield that I can get and not worry about duration in preferred stocks. It has been working fine, and will continue to do so.....until it doesn't.


Sent from my iPad using Tapatalk

 

[Fermion]

I don't think you can tie to a time period so long ago with any degree of accuracy.

Heck, the world changes so fast now I don't know if we can even relate to events a decade ago.

 

[AllDone]

Remember that the country was on a gold standard, so there literally was not much money available and that lack drove the deflation. Grover Cleveland ran on a platform that opposed "free silver" which was the inflationary policy of backing dollars with silver as well as gold. He advocated balanced budgets and fiscal austerity, too.

There is at least one presidential candidate who would like to return to a gold standard.

 

[daylatedollarshort]

I guess it's tough to make money when in the developed world we have more than we can consume. What people still want are not necessities like food, water, roof over the head, basic transportation but fluffs like new iPhones, fast cars, wonder drugs that promise to let them live till 100. There are still places on earth where people are hungry, but these miserable folks have no way to pay for the food that we overproduce.

When commodities are cheap, if a retiree keeps his taste simple his life will not be hard. I am OK with that.

Galbaith put it this way:

".... the mega-economy's expenditure of billions of dollars for the mental conditioning of consumers to the point where a well-financed advertising campaign can create needs, even urgent needs, which were never conceived of before in human history. To this end we are systematically brain-washed, and our whole way of life is being re-shaped, distorted, and corrupted to provide markets for the meta-structure."

Review of The New Industrial State
Galbraith's New Book on Industrial State Has Startling Impact - A book review by Professor Carroll Quigley

 

[HFWR]

I don't know how, or when, but the paradigm of growth, seemingly infinite growth, might eventually run its course.

As well, booms, busts, surpluses, shortages, inflation, and deflation, all seem inherent in a "free market". The FRB was created primarily because of the panics and recessions of the late 1800s. But, of course, trying to limit wild swings in the economy has its own risks, and likely shaves a few points off of the "growth". And central planning hasn't worked all that well, given human nature, and the lack of market feedback.

Then there are many issues with large gaps between the "richest" and the "poorest".

I don't have the solutions to these "problems", but I do think we'll have to deal with them, either with thoughtful foresight, or with very large Band-Aids...

If things go reasonably well, I'll proceed according to my current plan. If the SHTF, I'll punt. Thinking about these sorts of things is, to me, an intellectual exercise, because I'm a "problem solver", but it could also drive one to drink, due to the seemingly insurmountable nature of mitigating these issues, and others we may not even foresee...

 

[eytonxav]

Is this a case of history is destined to repeat itself or past performance is no guarantee of future results

 

[ziggy29]

I think one of the tougher challenges we will face (and to some degree, already are) is to figure out how to successfully transform a relatively low-unemployment, labor-intensive economy into one where automation starts drastically reducing the demand for actual human labor. If technology displaces too many in the working class (either a lot of people entirely out of work or most people are scaled back to part time), and the economy and our social safety net don't adjust to keep these people fed, housed and clothed, IMO it's a recipe for social and possible economic disaster.

 

[eytonxav]

I think one of the tougher challenges we will face (and to some degree, already are) is to figure out how to successfully transform a relatively low-unemployment, labor-intensive economy into one where automation starts drastically reducing the demand for actual human labor. If technology displaces too many in the working class (either a lot of people entirely out of work or most people are scaled back to part time), and the economy and our social safety net don't adjust to keep these people fed, housed and clothed, IMO it's a recipe for social and possible economic disaster.

I think automation and outsourcing (global competition) already turned us into a service based economy with high unemployment and lower wages. That said, manufacturing is what made American great, so the challenge may be, how to transition back into producing innovative and world class products that provide good paying jobs even with ever increasing automation and balance that out with a strong service sector.

 

[Mr._Graybeard]

I think one of the tougher challenges we will face (and to some degree, already are) is to figure out how to successfully transform a relatively low-unemployment, labor-intensive economy into one where automation starts drastically reducing the demand for actual human labor. If technology displaces too many in the working class (either a lot of people entirely out of work or most people are scaled back to part time), and the economy and our social safety net don't adjust to keep these people fed, housed and clothed, IMO it's a recipe for social and possible economic disaster.

Yes, I agree, the challenges are already there. In the 1880s, the hard times were on the farms where economic forces had become stacked against the people trying to eke out a living there. Nowadays the hard times have come to the old Rust Belt cities that have relied on labor-intensive manufacturing for their wealth. As a resident of the Milwaukee area I see this firsthand. What had been a relatively wealthy city in terms of worker prosperity is now one of the poorest.

Ironically, one entrepreneur in Milwaukee has turned to urban organic agriculture -- Will Allen's Growing Power provides jobs in labor-intensive organic farming, serves as an affordable source of organic vegetables and fish and, perhaps most importantly, gives a sense of purpose to people who desperately need one.

Of course, that's just one sandbag against a rising tide, and kind of a novelty act that is unlikely to answer the broad problem of worker displacement. I would hope greater opportunities come out of our newest technologies -- personal computers and the Internet. It's never been easier to serve a nearly global market as an entrepreneur. But competition is fierce. It's a Wild West on our computer screens, with gunslingers and bandits plentiful.