How we are losing all perspective of relevance and are becoming less and less productive

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Over the last three economic quarters for the first time in many years the U.S. economy demonstrated negative productivity gains. This means that, instead demonstrating steady improvements in productivity, as the U.S. economy has witnessed over the last few decades at record levels in comparison to most of the world, we now demonstrate the same poor to absent productivity gains that have plagued Europe and many other Western democracies for over a decade earlier.

The decline in national productivity during the Obama administration has, indeed, been remarkable, yet, found little attention in the national media. When the issue was addressed, it was mostly dismissed as a temporary and irrelevant phenomenon, since the country’s amazing technological advances, ultimately, had to translate into productivity gains, as they have done in the past.

Suddenly, the tone of the debate, however, appears to be changing. At least partially this can be attributed to public concerns expressed by Federal Reserve that lack in productivity gains will impede growth of the national economy. But, like the national media, the Federal Reserve appears puzzled by the rapidly declining productivity of the nation. They shouldn’t be.

National productivity can be defined as the sum of the national work product per time unit. The more the country produces per time unit of work, the more efficient the national economy produces its national growth product and the more competitive the nation will be vice versa other nations with lower efficiencies.

This is not different from our personal efficiency in completing tasks, whether at work or at home. A crucial component of being efficient in completing our tasks, as everybody will acknowledge, is our ability to prioritize: What is more important, of course, should be tackled first, while less important tasks will follow when time allows. In other words, to prioritize certain tasks over others because of their importance is an essential component of productivity.

We here argue that our society is rapidly losing the perspective on relevance as to what is and is not important. As a consequence, we lose our ability to prioritize and, therefore, become progressively more inefficient in producing work product. The consequences appear obvious and deeply worrisome: Unless we, as a society, strive to regain proper perspectives in prioritizing importance within our daily lives, including our political lives, we will face continuous declines in national productivity and, therefore, at best economic stagnation.

Examples for loss of perspective of relevance abound: In middle and high schools, emphasis on political correctness outweighs in importance the learning process. On the political front, teachers’ unions receive political priorities over the product schools are meant to produce, – properly educated students. Poorly educate graduates will, of course, lower the country’s productivity. In colleges, this trend has reached paradoxically excessive levels, when students are more concerned about being given “safe spaces” to be kept away from the realities of the world, than attaining proper educated to join the work force. The contribution of college education to poor national productivity is further enhanced by the excessive and still disproportionally rapidly rising costs of college education.

Increasing loss of perspective is, however, also demonstrated by government. As valid an accusations of racisms against law enforcement may be in some municipalities, prioritizing solving this problem over the murder of thousands of African American youths in inner cities, like Chicago, Baltimore and Washington, DC, demonstrates obvious loss of perspective of relevance. Allowing such a circle of violence, unemployment and poor education in inner cities not only to fester but to get worse, is not only inexcusable but very obviously reduces the nation’s productivity.

As important as international trade agreements may be for the growth of the economy, to reach such agreements without considering and preparing for negative consequences of such agreements on the U.S. labor market also demonstrates complete denial of what should be priorities. Take, for example, the Obama administration’s directed efforts to bankrupt the coal industry, its handling of the Keystone Pipeline and the billions of dollars wasted on clean energy companies that went bankrupt.

To favor productivity, as valid as concerns about Global Warming may be, government interventions have to be rational and cost effective. The world’s climate will not improve if the U.S. closes one coal mine, while China and India open 10 new ones at the same time. Nor will the nation’s productivity be enhanced if laid off miners, willing to work, become unemployed recipients of government handouts. Similarly, productivity will not be improved if oil has to be transported by rail rather than through a pipeline, since rail transport is not only much costlier but also prone to more accidents and, therefore, environmentally more damaging. Crony-capitalism, when government chooses winners and losers, also has never been shown to improve a nation’s productivity. To the contrary, when big corporation and government get together, it usually sucks productivity out of the U.S. economy.

In summary, unless the nation comes to its senses, and starts to understand that productivity levels have been lagging behind what this country historically has been able to achieve and, going forward, have to be dramatically improved if we, ever again, want to be the beneficiaries of a growing national economy, our economic picture will remain bleak and, probably, will even continue to deteriorate.

This is as much a wakeup call for Millennials, apparently the most spoiled and “entitled” generation in history, as it is for business and government. Our priorities in life have to return to what makes sense, and produces results before we waste our time (for an average of three hours every day) on Facebook or on chasing Pocahontas through the streets of our cities. Most importantly, however, our government structures have to recognize that a hierarchy of priorities is dictated not by political expediency but by proper perspectives on what is more important for success and, therefore, should be prioritized.

The Canary

The Federal Reserve is Too Optimistic: This Looks More Like Another Recession

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Listening to official and off-the-record comments coming from the Federal Reserve, noting the government’s reports on declining unemployment and optimistic representations of the country’s economic outlook, one would be inclined to believe that the U.S. economy is finally on the upswing.

After years of minimal growth following the most severe recession since the Great Depression in the 30s, it would, indeed, be time to see real growth in GDP and a reversal in Americans’ average income declines over the last decade.

The Fed is allegedly serious about the first interest rate hike in years before year’s end, an enormous shift from an almost zero rate imposed at the height of the worldwide financial crisis. The media considers this further evidence of an expanding economy, since it is generally assumed that the Feds would not start raising rates unless they were convinced that the economy was expanding.

But excuse us here at The Canary for not giving too much credence to what the Federal Reserve believes. As we recall, their track record in assessing where the U.S. economy is headed was not too stellar before the last recession either. Why would we expect them to do any better now?

Let’s recapitulate on what is really going on. To do so, we have to start with a quick worldwide survey, which is relatively straightforward because practically the whole world, except for the U.S., India and a handful of other countries, are already in recession. The most important contributor to the likeliness of a worldwide recession is China. Widely reported by the media, China’s growth rate has started to decline. Economists had predicted that double-digit growth rates were unsustainable but had counted on the ability of the Chinese government to “manage” the slowing of national growth to avoid economic shocks around the world.

There were reasons to trust in the abilities of the Chinese government to manage the county’s economy proactively because it did so very successfully during the 2008 financial crisis. But this time, the Chinese government failed, as witnessed by the crash of the Chinese stock market and the sudden slowing of the annual national growth rate to even below the “promised” 7%. Latest reports suggest a likely 2015 growth rate of 6.5%, and since Chinese government data are untrustworthy, the real growth rate can be expected to fall below 6%.

For any country in the world, including the U.S., a 6% growth would be cause for celebration; for China however, it means almost unmitigated disaster because it suggests continuous uncontrollable declines. Significant economic growth is, however, required to continue improvements in living standards of their one billion peasants and maintenance of social peace.

Declines in economic growth in China have even more significant effects on the rest of the world because, as the largest consumer of raw materials, even relative small declines in Chinese raw material purchases exponentially exert down-pressure on commodity prices around the world, leading to worldwide price deflation and declining growth.

On top of this you can add most volatile political situation in the world since the 1930s, almost revolutionary levels of political dissatisfaction with the political class in most Western democracies (including the U.S.), a European Union in economic as well as political crisis, the largest refugee problem since WWII, and a revanchist and increasingly autocratic Russia with expanding military foot print. It becomes difficult to envision how the U.S. economy could remain an island of growth in an otherwise economically depressed world. Moreover, have you noticed the unprecedented number of empty stores available for rent, in most major U.S. cities?

But here is the real reason why we forecast an economic recession in the U.S. in the very near future (we, indeed, may already be in its early stages): It has been known for decades that birth rate declines are a consequence of a recession. According to national U.S. Birth Registry data, the 2008 recession resulted in the largest recorded decline in national births (of course, nine months later) reported since the 1930s. More recently, a related prognostic “index” was reported when a group of fertility specialists reported that the demand for their services declines significantly during recessions. Indeed, declines in demand for fertility services abruptly declined a number of months before the 2008 recession officially began.

Our friends in the infertility industry are telling us that after continuous growth over recent years, they suddenly encountered a similar downturn similar to those experienced in 2008. Following the 2008 timeline, this would suggest the beginning of a recession not later than November/December of this year.

It will be interesting to see who is a better predictor of U.S. economic activity: The Federal Reserve or the natural instincts of human beings, who automatically reduce reproductive activities when they intuitively sense hard times ahead. We put our money on human intuition and, in full disclosure, have gone into cash.