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Today's Global Economy Where We're Going
As a restructuring professional, I am retained to fix or liquidate struggling businesses and often witness firsthand the warning signs of a recession.
At present, our world economy is tied to the US dollar, which for the last 50 years has not been tethered to gold or any other legally limiting factor -- an unprecedented stretch in human history. This system has largely remained stable, so long as the United States did not print money to catastrophic effect.
When we measure the current wealth-to-income ratio in the United States, it is over 700 -to-1, the highest level in recorded history. In the past century, any time the wealth-to-income ratio exceeded 600-to-1, what followed was a material correction in asset valuation. Many experts now refer to the current financial situation as the “everything bubble.” Similarly, countries such as China have taken on tremendous debt as well, and as recently reported in the New York Times, they are suffering from a major residential housing bubble.
In looking at where the Puck is going, there will be a correction in asset prices, and it will most certainly be painful. The question is not if there will be a correction, but rather when. I believe we are nearing the end of the cycle and then the question becomes, “will the pain of economic dislocation bring the country (and world) together or will it accelerate the trends of nationalism and polarization?”
I believe there is a tremendous opportunity for the business leaders of today, who have prospered as a result of quantitative easing and nearly unlimited liquidity, to work with thought leaders on a solution to move us back into balance. In the past, when the world economy was out of balance, it took revolution, war, or depression to motivate the population to self-correct. I propose a fourth alternative: an organized effort to understand how we got into this financial situation, and implementation of changes to restore us to a sustainable path preserving upward mobility. While some in the middle class have moved up, too many Americans have fallen behind and the hope of living as well as their parents has become a pipe dream. It has become increasingly clear that wealth and income inequality is one of the great threats facing modern American society. When confronting choices in our everyday lives, be they dollars spent, institutional investing, or at the ballot box, we can restore a sense of common purpose and hope in the American Dream. As business leaders, we can make the choice each day to move from staunch libertarianism to a more humane approach, and insist on a character based capitalism.
CATCH UP ON RECENT PUCK EPISODES
https://podcasts.apple.com/us/podcast/episode-31-eric-tarczynski-of-contrary-capital/id1338978270?i=1000535277363
Eric Tarczynski, founder of Contrary Capital, a venture fund focused on future leaders in engineering and design. Eric talks with Jim about the Contrary origin story, and how they scout and support talent. Eric has some interesting ideas about work/life balance, mental health innovation and how to build a community focused on the next generation of venture tech.
https://podcasts.apple.com/us/podcast/episode-32-ryan-falvey-of-financial-venture-studio/id1338978270?i=1000536128759
Ryan Falvey, co-founder and managing partner of Financial Venture Studio, and a pioneer in the fintech space. Ryan walks Jim through his background in mobile banking and payment platforms, discussing the massive upheaval at play in the financial sector – everything from a more curated financial experience to the changes in access to loans and the shift in the mortgage market.
WE CAN ALWAYS DO MORE
https://laincubator.org/laci-announces-first-of-its-kind-debt-fund/ This month The Puck is highlighting Los Angeles Cleantech Incubator , also known as LACI, the City of Los Angeles’s official cleantech business incubator, created to accelerate the commercialization of clean tech energy and employment creation. Founded in 2011, the incubator is a private non-profit 501 (c) (3) focused on helping drive innovative tech toward a clean future. LACI works to scale small businesses and connect entrepreneurs committed toward tackling climate change. With a partnership between private industry and the public sector, the organization is able to fast track vital change on key initiatives in transportation, energy and sustainability in our cities. Charity Navigator gives LACI an impressive rating of 100 out of 100.