Post WW2 International Economic Competitive Adjustment and the New Normal

Summary of  Short Term Politics Versus Long-Term Returns  Prof. Mark Blyth PhD - Interpreted by Walter Antoniotti   Please Share


Post WW2 pent-up demand
increased AD increasing US wages and Profits.

The resulting high inflation pushed interest rates up followed by a 30-year decline..
Profit margins stayed high as Western economies used continuously falling interest
rates for highly leveraged refinancing. 

This reprieve gave Western business time to adjust to a mounting profit squeeze
caused by increased flat world AS. These adjustments matched wages against profit.

Wages lost.

With only the U.S. increasing demand,
a global savings surplus caused AS > AD.
This will continue.

Resulting political turmoil will also continue but its effects will be less volatile allowing
Fiscal Policy to return in the form of Infrastructure spending and or helicopter money
drops like tax reductions.

Guaranteed Government debts may allow 2% real 1950's economic growth.

Cold War to 1980


Neo Liberal Era 1980- 2008


Three Problems of the AS > AD Era in a Democracy

Full Employment Goal led to Inflation
 and a Debtors Paradise

Business Responded Leading to
Deflation and a Creditors Paradise

1) Sustained Deflation has 
Winners and Losers

2) Globalization Failed 3) Pickett's R > G  Meant 
Competitive Adjustment Back to Equilibrium
Structural Causes Structural Causes Losers Winners    Winners and Losers Historical Long Run?
Return on Capital Growth R >
Growth rate of the Economy G

90% of Income Gains Went to Top 1% and
since 2012  most (70% of that 90%)
Went to Top 1/10 of 1%.

Strong Unions

National Markets

Central Government Strong

Central Bank Weak

Finance Weak

Weak Unions

Globalized Markets

Central Government Weak

Central Bank Strong

Finance Strong

Creditors lost as
Real Value Up But Some
Don't Pay
Can't Wont Pay
as Deflation
Kills Wage Growth and Increases Real Debt Value
World's Very Poor and
Very, Very Rich Win

Vast Middle of Rich Western Nations are Stagnate

Economic Results

Sustained Inflation

 Wages Share All Time High

Corporate Profits All Time Low

 Inequality Low

Economic Results

Secular Deflation

Wages Share All Time Low

Corporate Profits All Time High

Inequality High

Center Left Parties lost as lower wages moved
voters to right leaning parties
Populist Nationalist Parties: attract voters with renationalize and form anti-austerity policies

Mark's Investment Advise:  Demography is important

Buy Boomer Health

Demographical Active firms

Buy Real Assets Avoiding Europe




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World Changed and Good Jobs Disappeared caused

Middle Income Stagnates leading to

Income Inequality which means

Taxing the Rich because of

7 Post WW2 U.S. New Normals