The pandemic has ratified and accelerated a whole host of ATOM principles, so I have to update parts of the entire publication. Suffice it to say, a number of pent-up ATOM predictions just got fast forwarded, with a seminal day in the history of economics having been forced into manifestation. We can divide the events into two parts : technological and monetary.
Among technological disruptions, there are three that qualify as having been overdue for a long time, that got tipped over by this catalyst :
1) Video Conferencing : This was something that Cisco expected to take off 14 long years ago, but expensive proprietary hardware and the inertia of old habits prevented it from attaining the critical mass necessary for entrenchment. Cisco lost at least $6 Billion on this endeavor. Now, however, as people are forced to work from home, a critical mass of users have to adapt to this usage, which in turn attracts more innovation and capital to the technology. While none of the companies advancing videoconferencing in 2009 are the same ones as the ones winning now, this is common in the technology sector (recall the search engine wars). The cascade of disruptions I listed in 2009 still apply. Among other things, if cubicle-style workplaces can agree that all on-premise meetings are restricted to three days a week (M-W, or Tu-Th, or whatever), then the distance that an employee can commute effectively doubles, and the housing availability for them thus increases 4X. The current status quo of certain real estate being vastly more expensive than equivalent real estate 30 miles further from the jobs cluster may finally correct. This is a form of standard-of-living increase that is poorly captured in GDP statistics.
2) Educational Institutions : The extraordinarily distorted cost/value equation of both higher and lower educational institutions (which should not be conflated with the concept of 'education') already crossed the point of no return in 2015. But, as with videoconferencing, too few people were willing to be 'Spartacus' and make use of alternative solutions that were in fact lower risk. This applies to both students and employers, for employers declaring that they will hire based on on-site testing and online certifications, rather than degrees that bear little to predictive value of employee performance, is the catalyst that would have induced more students to bypass the universities-as-gatekeeper oligopoly. The fact that universities want to charge the same tuition for online classes (and are being sued by students disputing this), when comparable online classes are available for orders of magnitude lower prices, is going to reduce US university enrollment permanently. To cope, there is no reason that US universities cannot be forced to return to a 1980s-era cost structure.
3) Retail Real Estate Re-Purposement : Overlooked among the technological and economic effects of this black swan is the fact that the 'retail apocalypse' and shift to e-commerce has fast-forwarded to such an extent that millions of acres of US retail land (including parking lots) will never return to previous levels of usage. This was partially mentioned in the ATOM AotM for August 2017, and is often brought up in comments. E-commerce was still just 12% of all retail sales before the pandemic, but if that 12% were to shift to 15%, or effectively jump two years ahead of the previous trend, that alone is a vast acceleration with visible results for the suburban landscape.
In fact, when you combine the permanently lower demand for premium office space from the greater usage of videoconferencing, and the mass closure of retail real estate (at least in the US, where six times as much land is allocated to retail relative to most advanced countries), the correction and pressure to re-allocate could be extreme. In places like California, the extreme restrictions on new residential construction will be exposed even more visibly as office space joins retail in a permanent glut.
But the bigger event was not even these technological accelerants. Instead, the complete and supreme validation of all ATOM conclusions was manifested fully. Recall that the Federal Reserve was actually reversing QE and increasing interest rates in 2019. It had begun to pause and correct that misguided reversal process, but still at too timid of a rate of net increase to even keep up with the ATOM trendline of monetary creation required to halt technological deflation.
However, this crisis forced the Federal Reserve to do the right thing, even if they still don't understand the new economics of technology. March 15, 2020, is a day that can fairly be described as the 'Netscape Moment in Economics'. For those who recall the original 'Netscape Moment', on August 9, 1995, the Internet browser company Netscape did an IPO that exceeded its anticipated price by a huge margin, and triggered a boom in Internet company formation for the next 4.5 years. Even after the bust, the economy was permanently into the Internet age. Similarly, 3/15/2020 is the day where the Federal Reserve, in one fell swoop, lowered the Fed Funds rate to 0% (where it should have been all along), and signaled permanent QE. In the following 10 weeks, over $3 Trillion of new QE was done, and the entire trajectory is starting to look more like the exponential parabolas that we are accustomed to seeing wherever the accelerating rate of change and exponential technology emerge. As of May 31, here are two charts to depict the total QE effect (source : Yardeni) :
The first chart indicates the cumulative rise in the sum of the four major central banks. Note the feeble attempt to reduce the balance sheets in 2018-19, only the forced to return to the trendine. The second chart is the YoY percentage increase. I have always said that the ATOM requires 16-24%/yr as an annual rate of increase to offset deflation and maintain optimal (2-3%) inflation. The increase is now probing the upper limit of even my range, and it will be interesting to see if inflation emerges even then, or if the ceiling is even higher than I estimated (meaning that technological progress is now even faster and broader than before, and monetary creation could be higher than before).
I said elsewhere that the decade of the 2010s had $23 Trillion of cumulative QE worldwide. The PhD Economists of the world, who have predicted 100 of the last zero bouts of hyperinflation, still believe QE is an aberration and assume that the cumulative QE will be reversed (i.e. that the 2020s will have -$23 Trillion of cumulative QE). I claim the opposite, which is that under both ATOM principles and the Accelerating Rate of Change, the 2020s will see about $100 Trillion of QE, and that this will move towards sending cash directly to people (rather than the esoteric bond-buying that comprises of QE today, which inevitably concentrates the benefit of this monetary creation in very few hands).
Mark my words. The entire profession of economics, full of PhDs who have never had any contact with entrepreneurs and real-time economic decisions, will be wrong by an epic margin.