Or so says Michael Hartnett, chief investment strategist at Bank of America Merrill Lynch, who in a note out Wednesday lays out a future case for the US and global economy that, well, is depressing.
If, that is, you’re a wage-seeking worker and not a rent-seeking financier.
Our post-crisis sociopolitical environment has really been defined by one big trend: increasing income inequality.
But Hartnett argues that this income inequality has been exasperated by increasing automation and increased support for financial market from central banks.
Which, on the face of it, seem like unrelated sources of stress for the average worker. But in Hartnett’s view, these two dynamics ultimately give us a world where you, the worker, are worth less.
Simply put, capital has been valued over labour. And Hartnett expects this to continue.
Tech disruption is negative for workers:
attempts to address inequality via higher minimum wages is likely to accelerate automation in the labour force (note the sharp increase in the use of industrial robots this decade and the stagnant level of manufacturing employment — chart 3); the increased use of robots & AI may also be reducing wage expectations, thus helping to explain why household savings continue to rise.
Increased central bank liquidity — things like quantitative easing, which have benefited the existing holders of financial assets — has in Hartnett’s view put our post-crisis economic gains in the hands of a few.
From here, Hartnett thinks things go two ways:
- World governments reach a collective deal that involves coordinated fiscal stimulus to boost corporate profits and job creation.
- Or, everyone hunkers down and we see capital controls, protectionism, and increased regulation. (Along with government-mandated, labour-protective measures like higher taxes for higher earners and increased minimum wages.)
Hartnett thinks the latter is more likely, as politically it’s much easier to defend whatever status you think you currently have — “Make America Great Again” is not really about the past or the future but is grounded in a worldview that America is, right now, pretty great and will be again if only we do all the stuff we used to: like tax rich people and pay workers more and welcome immigrants — than advance a message that you can create a better, but unknown, future.
For investors, the answer is buy municipal bonds: they are tax exempt.
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