At the Easter show, my six-year-old daughter wanted to buy the Gudetama show bag, which obviously got me thinking about property, central bank policies, and the state of the world.
Gudetama is an anthropomorphic egg yolk created by the Japanese company Sanrio who is always lazy, tired, and complaining about its hard life. It has become an extremely popular character gaining a global following worldwide and a 100% rating on Rotten Tomatoes for its Netflix show. Although the original target audience was little children, it has surprisingly become popular with teenagers and adults who relate to its mood.
It represents the tiredness, and unbearableness young people feel about life and their disenchantment with work. Gudetama appears to be having an existential crisis and questions the meaning of life. In another case of art imitating life, Gudetama’s behaviour is a commentary on the human condition.
The fact that this character has become so popular amongst millennials means it’s captured something in the zeitgeist. Perhaps it’s unsurprising that it originated in Japan, which has effectively faced a soft depression for 30 years struggling with asset deflation and low growth. Many Japanese youths find themselves in a precarious job market. Nearly a quarter of Japanese corporations require employees to work more than 80 hours per week, and although illegal, overtime is often unpaid. With this comes anxiety about their ability to support themselves, let alone start a family. Death by overwork in Japan has become so common that there is even a word for it, “karoshi.”
The fact that the show is gaining traction in the West indicates that the same pessimism is also among millennials here. This is reflected in the data with a study by the University of Cambridge finding millennials in every global region to be the ‘most disillusioned generation in living memory,’ having low faith in democracy and viewing leaders as morally flawed. Interestingly these attitudes soften as age increases.
One must wonder if Western economies’ declining birth rates and delayed marriages also relate to this. Without the security of employment and with property prices increasing faster than incomes, even thinking about having children and an expensive wedding seems overwhelming. It’s clear that people subconsciously know something is wrong with the system, and they are getting left behind, but they can’t figure out why.
The answer lies in the central bank policies around the world. The endless printing of money debases the currency. While people often compare the strength of the AUD to other currencies, and all looks well, the truth is that we’re comparing it to other currencies that are also falling in purchasing power. Understanding that fiat currencies are effectively sinking ships in a race to the bottom is the key to understanding the problem. It explains that while people have seemingly good jobs, work hard, and do the right things, like live below their means and save money; they can’t get ahead. Asset prices and the cost of living keep moving further and further from their reach.
If we were to measure average income against assets, we would find that we can buy fewer stocks and fewer properties than at any time since the 1960s. This means that while our incomes may be rising in nominal terms, they are failing to keep up with the rate of monetary debasement. If we flip the equation and divide asset prices by the M2 money supply, it would surprise many that they haven’t grown. The price increases are just a reflection of the reduced purchasing power of the AUD. The only two assets that have effectively bucked the trend over time have been tech stocks that increase due to Metcalfe’s Law and property – primarily due to leverage.
The net result is a widened wealth divide between asset and non-asset owners. The latter of which overwhelmingly tend to be young adults. It’s unsurprising that millennials feel disenfranchised.
The insidious negative effect of currency debasement on society isn’t a new phenomenon and has only accelerated since 2008. This has effectively monetised housing into an asset class because hard assets are a good hedge against money printing. This is something the wealthy know and is probably why sovereigns like the royal family of England have chosen to store the vast majority of their family wealth in land over the last 800 years. For ordinary plebs like us, the only way to break out of this doom cycle is to buy assets; we have no other option if we don’t want to work like crazy, only to find ourselves going backward. The good news is when it comes to timing, property looks like it’s carved out the bottom of the cycle, and prices are already beginning to creep upward.