Tying all of these observations and analyses together, the comprehensive definition of what the ATOM is and how it behaves can be summarized as follows, and in the attached powerpoint :
- Technological change, despite occasional deviations from the trendline, is exponential and accelerating.
- Economic growth is driven by technology, and has always been exponential and accelerating. Half of all world economic growth that has ever occurred has happened after 1997.
- Technological disruptions generally displace one set of industries and workers, while creating more wealth elsewhere. More wealth is created than destroyed, but often in different places.
- Technology invariably finds a way to displace a commodity, organization, or industry that is resistant to technology or otherwise obstructs the progress of technology, whether directly or very indirectly.
- No industry is immune to technological disruption, and industries that resist this process merely experience a sharper disruption at a later date.
- Technological disruptions tend to be interconnected with each other, and a rapid disruption in one area exerts a strengthening force on other nascent disruptions.
- Artificial Intelligence (AI) will eliminate many jobs, but will also create a vast category of new business models and careers. Media coverage of AI focuses only on the former effect, ignoring the latter.
- Technology is inherently deflationary. While this effect was too minor to matter until recently, with technologically-deflating products now comprising 2% of annual world GDP, this deflation now has significant (and still rising) macroeconomic effects. AI in particular will be exceptionally deflationary.
- An increasingly outdated focus on ‘Real’ GDP, instead of Nominal GDP, has led to a primary cause of economic sluggishness and weak job creation being overlooked. It is erroneous to assume that low inflation does not correspondingly decrease Real GDP growth.
- The Federal Reserve should aim for an NGDP target, rather than an inflation target. Inflation will still be just 2-3% within a 6-7% NGDP environment.
- The central banks of the world have been generating new money in a pattern that is rising exponentially, contrary to what they expected. This is due to the need to offset technological deflation.
- Despite talk of QE and other expansion programs ending, they cannot end, nor can they even fail to increase the amount of QE each year.
The next question becomes how the governments of the world should transition to this new reality. Policy inertia and status quo bias are the default situation for most countries. This has introduced a variety of imminent risks.
Continue to : 6. Current Government Policy Will Soon Be Ineffective