While not mentioning any of Elon Musk’s various entities (perhaps for a reason) or dying on Marks, some analysts are looking out of this world for an answer to earth’s questions. When Macquarie’s Viktor Shvets and Chetan Seth look at the world, the see a John F. Kennedy moment. In a world filled with fiat currencies and political pressure on central banks to continue to do it all with “helicopter money,” Macquarie wonders why not explore deep space?
Macquarie: We are facing JFK like challenges, why not a JFK like solution?
During JFK’s day, the world was focused on providing (and succeeding) at providing the next generation a better life. There were challenges, to be sure, but they were just different.
The threat to world security was apparent in the seas of Cuba during the missile crisis and the presidency of a reform-minded liberal was tragically cut short.
Today, Shvets and Seth point out, the challenges are different.
“As JFK was racing against the Soviets, we are racing against consequences of over leveraging and technological transition (all reflected in a new secular stagnation),” they wrote. “Whilst JFK was facing the unpalatable prospect of Soviets conquering space, we are facing unpalatable consequences of ‘fiat money’ and the structurally and socially unacceptable consequences of what we describe as the new ‘age of declining returns on humans’.”
Macquarie: Free markets are no longer “free” and technology displacement will be a two generation problem
In a one-page report titled In “JFK’s footsteps Mars, communism, fascism or war,” the authors introduce “a bold plan to solve problems in one stroke.”
In attempting to solve all the world’s problems on a single-page report, Shvets and Seth start out by outlining the issues. When they address fiat currency, a model around financial transactions that requires a market to set a value on a government printed piece of paper, the touch on the big issues of the world that seldom do people want to address.
In a world where financial engineering rules, financial assets have ballooned to nearly 4 times GDP.
“As in the children’s story, ‘Princess and the Pea’, the real economy (~US$70trn) is completely overshadowed by financial assets that constantly threaten to crush the Pea,” Shvets and Seth write. “Hence (central bank’s) creeping nationalization of various global markets, with free market signals rapidly degrading.”
Whey they say “Free market signals rapidly degrading” they are using polite code. The extent to which Macquarie implies market manipulation is unknown. In its gentlest state it implies suppression of the bond market, which the central bank has acknowledged in its own analysis influences other asset prices such as stocks. In the aggressive interpretation, free markets in stocks are being more directly influenced. The truth at this point remains undocumented.
Technology is going to make humans a wasting asset, why not send them into deep space?
With regards to technology replacing humans, the report notes that eventually “machines and people ultimately always line-up.” It might take a “period of disruption” that could last two generations, but eventually machines and people line up.
With technology replacing the need for humans in an economy, the problem becomes clear. There are just too many humans.
There is, of course, talk of central banks getting involved in traditional fiscal stimulus – putting the humans to work on a temporary basis. The report says such activity is will likely lead to temporary misallocation of resources, environmental concerns and, depending on how it is financed, hyperinflation or stagflation. Take your pick.
But the big problem is there are just too many humans, the report surmises.
The answer? Ship them off to space.
In the mid-‘60s NASA was ~5% of Government spending; today it is ~0.5%. If one added defence, space might have represented up to 10% of outlays. We are not suggesting that governments would not increase conventional spending; we are simply ready for an inspired space speech. Private equity has already raised ~US$2-3bn whilst the paragon of consensus (Economist) is profiling space. All of this is even before there has been any hint that NASA budgets might be going from a run-rate of US$20bn to US$200bn+.
If either central banks or the government side of the equation is going to spend money on stimulative measures, explore new unknown worlds, the report urges. What is the difference with that and nonconventional monetary policy?