No. of Recommendations: 4
Nobody knows. Nobody ever knows. This is a complaint that could be made during any recession, depression, or moment of economic uncertainty during the past 200 years. And after a period of self-flagellation (and other necessary economic retrenchment) we pick ourselves up and go forward. When? Where? Really, it's a total mystery. But it's not going to stop forever because you don't need to upgrade your computer as often.

This is why I call this faith-based economics. I have no doubt there will be innovation, but that doesn't mean it will lead to new and better jobs. History is complex on this: job losses from increased productivity have been mitigated by immigration, migration, high percentages of public employees, shorter work week, and of course wars.

We have seen a major new innovation over the last 25 years, and we can easily see how it has enabled increased productivity and will continue to do so. But job growth in this country after the recession (I don't take 9-11 as a real factor, just a brief psychological blow), despite record profits and officially high growth, was way below par and almost entirely fueled by borrowing and the housing boom/bubble. The Great Depression took WWII and a huge percentage of the population working directly or indirectly for the government to turn around, and building the interstate system after the war. Not only was there then a population boom, but there really was lots of new stuff out there for people to want, even if perhaps not necessary to meet basic needs. My concern is that this time it is different: aging population, productivity gains that affect not just manufacturing and farming, but services. And most of the new "stuff" is replacing old "stuff" to accomplish the same "needs." My mother-in-law just sent us my late father-in-law's 35 mm camera. I have a very good 35 mm camera (actually 2, if you count the one without auto-focus I used when I could see well enough to use it). I don't even know where to get film developed (I'm sure there are still places) and haven't used it for years. I remember trying to explain digital cameras to my late father-in-law, who couldn't understand how anyone would make money (this was before the craze among teens and preens sending self-porno over cell phones). My answer was, and is, once people decide they don't need a hard copy, there will be little money to be made once the camera is bought.

The number of people working in financial services in recent years has been staggering—I consider this corporate feather-bedding (people extracting a huge percentage of GDP that does not become working capital). Obviously, the housing boom funded by debt financing was a private sector (with help from the Fed) version of public works projects. Gambling has been a growth industry—very healthy for the economy (and I think way over capacity). Eating out has boomed, with women entering the work force, but what happens if people figure out they can save money and eat better cooking for themselves? Which basically leaves health care. We seem to be headed toward and economy where caring for sick, old people is the growth industry. Oouch!
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