A Return To Normal
Pacific Investment Management Company’s (PIMCO) Dr. Mohamed El-Erian is calling for a “New Normal“. Dr. El-Erian, Co-Chief Investment Officer for a firm managing over $700 billion in fixed-income assets, argues that our near future will be characterized by a decrease in expected economic growth and an increase in expected unemployment. On Monday, Barron’s will release an interview with David Kelly, JP Morgan Funds’ Chief Investment Strategist, featuring a very different view of the “New Normal“. Kelly predicts a gradual decrease in unemployment will fuel our economy to “expand at a faster-than-average pace”.
And while Dr. El-Erian would like to sell you PIMCO bond funds, and Mr. Kelly would like to sell you JP Morgan stock funds, yet another is just trying to make you think. Back in April, Business Week’s Bruce Nussbaum wrote “The New Normal: De-Globalize, Re-Localize“. It seems the new normal is actually calling things the “new normal”. In it Nussbaum, BW’s assistant managing editor for innovation and design, argued that our future will be characterized by a slowing of globalization and a continuing movement towards localization as we have seen with the “slow food” movement.
Economists like to theorize about things such as full employment (which, by the way, does not mean zero unemployment), as if everything can be somehow be explained as a science. The truth is that forecasting is probably 3% science, 30% luck, and two-thirds black magic. Design pundits for business magazines try to bring in the fair trade coffee drinking, fixed-gear bicycle riding, Mac-using business yuppies. Local seasonal and organic crops may be one direction the economy is moving in, but a return to isolationalism is a) a step backwards in innovation (see The Technium: Increasing Diversity) and, quite frankly, b) not going to happen on a large scale (it’s just bad business).
In reality, the future of normal is not likely to be “new”. It is likely to be… normal. The average American won’t know, and frankly won’t care, what level the Dow is at or where it’s going, unemployment will be just another nebulous statistic that gets lost in the news, and GDP will be some great big number that only economists care about. What many of us that have experienced life know is that life is unpredictable and unexpected. So what else do we have to look forward to? 20 year-olds making minimum wage will no longer be given million dollar mortgages, banks will borrow and lend money that actually exists, and Jack Bauer will save us from terrorists in a mere 24 hours. That, my friends, will be just plain normal.