Those without value-creating human/social capital will be mired in a low/minimum wage environment that will make it difficult to escape debt-serfdom.
Let’s start with the sobering reality that the Millennial generation faces economic challenges that are unique to this era: sky-high student loan debt, soaring costs for basics such as rent and healthcare, a stagnant neo feudal crony-cartel economy and an intellectually bankrupt status quo in thrall to failed ideologies: Keynesian Cargo Cult central banking, outdated models of capital and labor and an unthinking worship of debt-funded centralization as the “solution” to all social and economic ills.
The potential solutions are also unique to this era. Never before has humankind had such a wealth of revolutionary decentralizing technologies: nearly friction-free peer-to-peer networks and commerce, decentralized crypto currencies and the expansion of what my friend G.F.B. describes as neo-tribalism: opt-in communities that are not bound to geography or central-state imposed identities.
Many smart, well-informed people see massive government stimulus using borrowed money as the “solution” to Millennial impoverishment and under-employment–in other words, more debt-funded centralization.
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The idea here is that such debt-funded stimulus will employ millions of Millennials to rebuild America’s crumbling infrastructure.
While we all understand the appeal of this proposal, those proposing it have little experience in actually building or repairing infrastructure. The assumption that such massive public spending will create millions of jobs is never examined closely, nor is the impact of adding trillions of dollars in additional public debt considered.
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What such schemes boil down to is: Millenials are supposed to borrow trillions from their future earnings and their children’s earnings to fund a few years of employment.
But what happens after the bridges get repaired and the homeless housing gets built? In the conventional fantasy, the economy magically moves into a self-sustaining growth cycle because those construction workers will be buying more coffee at Starbucks, more lunches at Mickey D’s, and so on.
But the cold reality is: once the money has been spent, those jobs go away.Once the bridge has been repaired with public money, the workers are laid off because there is no private-sector funding for more bridges or homeless housing, etc. Once the construction workers are laid off, sales at coffee shops and fast-food outlets fall back to pre-stimulus levels.
The surge in employment fades as soon as the funding dries up. Additionally, there is little productivity gain from the infrastructure spending: the repaired bridge performs the same service as the aging bridge.
The problem is this: after the government funding dries up, we still have a corrupt crony-cartel economy based on predatory privilege, parasitic rackets, and central-state enforced fraud. In other words, we still have an economy that strangles productivity that could benefit the many in order to further enrich the few.
And as Gail Tverberg and Art Berman have explained, we have an economy that is facing lower energy consumption per capita (per person)–even if oil prices remain around $40/barrel.
Central state stimulus funded by debt only creates a brief illusion of prosperity; it changes nothing in our broken system. All it does is burden a heavily indebted generation with more debt–a generation that cannot afford to consume more because so much of their income is already devoted to debt service.
The other fly in the ointment is this sort of spending doesn’t create as many jobs as the uninformed assume. If you stop and look at a bridge being repaired, you’ll note the crew is small–in many cases, a half-dozen or less. The same is true of road resurfacing crews and other infrastructure repair work.
You’ll also notice the crew has skills that take years to acquire: operating a crane, welding, etc. The unskilled are limited to waving the traffic-control flags.
The same is true of new construction. If you count the workers erecting large new residential buildings, you’ll note a few dozen workers on the site–and the buildings are finished in a matter of months.
