The Next Big Risk

Come viene illustrato oggi, in altri Post pubblicati in questo Blog, la stagflazione è il tema dominante, oggi, sui mercati finanziari di tutto il Mondo.

Chi segue questo Blog ne era informato ormai da 14 mesi, e precisamente dal Post che pubblicammo nell’agosto del 2020.

In quel Post veniva evidenziato proprio il rischio stagflazione come il maggiore rischio per i 12 mesi successivi, con queste parole: Vi chiediamo inoltre di notare i ripetuti accenni al tema della stagflazione, e quindi degli Anni Settanta. Sarà un tema dominante, nei prossimi 12 mesi. Si tratta di un servizio che abbiamo con piacere messo a disposizione di tutti in modo gratuito, in quanto concreto esempio di come un gestore professionale di portafoglio può curare al meglio i vostri investimenti, nel vostro esclusivo interesse.

I nostri lettori più attenti, quindi, considerano la stagflazione il tema dominante oggi dui mercati finanziari, ma allo stesso tempo si domandano: quale sarà il tema dominante, tra 12 mesi? e come devo prepararmi, oggi, con il mio portafoglio di investimenti?

La stagflazione è il rischio di oggi. Quale sarà il rischio di domani?

Noi su questo abbiamo oggi le idee molto chiare, tanto che ne abbiamo scritto, nel nostro The Morning Brief, ogni mattina la settimana scorsa.

Si tratta del tema della diseguaglianza: un tema del quale quotidiani e Tv hanno accennato velocemente, ma in più occasioni, negli ultimi anni, anche a commento del successo di alcuni libri, oppure al margine di manifestazioni e proteste.

Come noi abbiamo illustrato ai nostri Clienti, nell’ultimo anni questo tema è però entrato con forza sia nelle dichiarazioni pubbliche delle Banche Centrali, sia nei documenti, nelle “ricerche” e nelle dichiarazioni delle banche e delle altre Istituzioni internazionali.

E’ quindi indispensabile non soltanto comprendere il problema nei suoi vari aspetti, ma pure capire in che modo andrà ad influenzare le scelte concrete.

Le decisioni di politica monetaria delle Banche Centrali, le decisioni di politica economica dei Governi, ed anche le scelte delle Aziende.

Noi riteniamo che l’impatto sarà molto maggiore, e molto più urgente, dell’impatto dei temi legato ai cambiamenti climatici, quei temi che oggi trovate sulle prime pagine di tutti i quotidiani.

Tra un anno, saremo qui con voi a verificare.

Nel frattempo, tra centinia e centinaia di commenti, ne abbiamo scelto uno particolarmente qualificato, che qui di seguito vi mettiamo a disposizione gratuitamente.

What worries me the most is inequality, both within and across countries. And it’s something that financial markets puts aside as a social problem, not really an economic or financial problem. And we’ve risked seeing the issue of inequality gather momentum. Covid has already been the great un-equalizer, but rather than go back to where we’ve come from, we are now creating the dynamics for inequality to worsen and to assume greater importance in disrupting all sorts of things in our society.

A highly unequal society is not an economic healthy society. But the thing that worries me even more than that is inequality of opportunity. We know what Covid did to people who had no WiFi at home, who had no computers. We know that public school districts lost touch with a lot of their students and these students were not only becoming unemployed, but unemployable, which means a lost generation of young people.

As we slowly emerge from Covid, its aftermath creates different dynamics around the world. If you’re in a developing country today, you can no longer assume that companies will come to you. The onus is increasingly on you coming to the employer. And that is the real issue when education is lagging, when technology is lagging. So I do worry that we’re going to see this massive process get larger, if we’re not careful.

We were watching a tragic movie in play mode and then Covid came along and pressed fast-forward. First, it worsened wealth inequality because the response to Covid involved massive Federal Reserve liquidity injections to boost asset prices. And who owns assets? It’s the rich. So if you look at what has happened, the top part of the wealth distribution, people are much better off than they were before Covid. But at the bottom end, that hasn’t happened.

Think of people whose jobs have been displaced by this big step toward digitalization, who have no financial assets to begin with and don’t benefit from what has happened to asset prices. In addition, they are hoping to buy a house and they’ve been priced out of the housing market. So suddenly both the actual and potential wealth and income has declined.

To add to that, if they are unemployed, there’s suddenly a skills mismatch. There are record levels of vacancies that the labor market is not able to match to workers. And then you get what economists called multiple equilibria: one bad outcome, resulting not in mean reversion, but a high likelihood of an even worse outcome.

We already know what it looks like because we’ve had a taste of it. On the economic side, it looks like insufficient aggregate demand, which is a fancy way of saying that as the rich capture more income and more wealth, they spend less of it. The poor tend to consume more. So if the incremental income and wealth all go to the rich, then you’re going to have the problem of demand, which means you’re going to have a problem of growth.

And we’ve already had a period of so-called secular stagnation, and what my colleagues and I call the new normal, where we get low and insufficiently inclusive growth. We know what that looks like. We know the social consequences. It is cultural war. It’s alienation. It’s marginalization. That’s not good for society. It eats away at the fabric of society.

We know what it looks like politically. People will become single-issue voters, and single-issue voters can be captured by all sorts of things. No wonder we’re seeing an increase in populism across the world. And then it means a less equal world. You know, I grew up interested in developing countries, and for decades it was almost an accepted fact — not a hypothesis, almost an accepted fact — that these countries would converge to the advanced economies.

Well guess what? We’re having divergence going on right now. And I suspect this divergence is not short term. So we may live in a less equal world, or to be more blunt, a much more unequal world. And that’s problematic for global economic policy coordination, interdependency, immigration. I mean, I can go on and on. So it is problematic. We’ve had a taste of it and we don’t quite like that taste, but it could become a lot worse.

The American dream is all about capturing these amazing opportunities and being able to go right up the income ladder. There’s a correct notion that inequality can incentivize people to work harder, to do better, but there comes a point when it goes from encouraging people to do good things to actually detracting from not just economic well-being, but social and political well-being.

I don’t think the American dream is dead. I think it’s harder to achieve. If you don’t have the right education to begin with, if you don’t have a set of assets to begin with, you’re looking at a much steeper curve, and that is a real problem for too many people.

The prescription is investing in human and physical infrastructure. It’s about enabling people to do more and to do better. It’s about providing people with transformational opportunities. It starts at a very early age, at pre-K, exposing bright minds to exciting education and opportunities. It continues throughout the middle school, high school, university, making elite universities more accessible to people who deserve to be there but may be held back because they come from the wrong zip code or because their parents have never had an education.

There’s a lot that can be done. It’s about fundamentally asking the question, ‘How do we enable our resources, human and physical, to be more inclusive and more productive?’