This morning, I am looking at the following chart of average home prices in the Greater Toronto Area:

It’s from this Globe and Mail article.

These are staggering numbers. The average price of a detached home in the suburbs (905 area code) increased 21% year-over-year. In the city (416 area code), the increase was 19.6% YOY. These numbers are almost unbelievable.

The article focuses on low supply (decrease in listings) and high demand. And that is certainly a big part of what’s going on here in this city, as well as in many others.

But of course, the backdrop to all of this is our low / zero / negative interest rate environment.

Larry Summers has a great post on his blog (which I discovered this morning via Fred Wilson) that talks about this “remarkable financial moment.” In some instances, real interest rates are actually negative! (You should read his post.)

There are always people threatening that interests rates just have to go up. But Larry, as well as others, continue to argue that natural real interest rates are likely to remain close to zero going forward.

Fred mentions Albert Wenger on his blog this morning and I have written about him before as well, here. In his book World After Capital, Albert argues that capital is no longer the scarce resource of our time. Instead, it has become attention.

If you believe all of this to be true, then perhaps the numbers at the top of this post aren’t so unbelievable after all.

Earlier in the week, I came across this post (via Fred Wilson), arguing that rapid technological progress is causing systemic deflation in the broader economy.

Here’s a chart that illustrates the author’s point:

What is happening here is that despite advances in technology and increases in productivity, real wages have been stagnant for decades. (This chart is for the US, but it likely applies to many other countries.)

This is an interesting paradox. For a long time, increases in productivity were met with corresponding increases in income. So why the divergence?

The author believes that it’s because the gains brought about by “extreme technological progress” are being unequally applied to the economy. In other words, they do not benefit the majority of people. He then goes on to argue that we could be entering an entirely new macroeconomic era: 

“Economic growth may be over soon, at least in absolute terms. On the other hand that will be at least partially offset by the technological deflation. So instead of the decline of the innovation it will be just the opposite, the explosion of the innovation that will turn the economy to the decline. And moreover, it will not be a tragedy since we will be able to produce higher standard of living with fraction of the GDP today. Few adjustments needs to be done into our economic system to cope with the change for sure.”

When you read things like this it makes the idea of a “basic income guarantee” seem far more palatable.

The other chart that stood out to me was this one below, which shows the declining cost of solar panels and the rise of global solar panel installations. 

It’s a great reminder that it’s only a matter of time before we wean ourselves off of oil. And, that we could be headed towards some sort of third industrial revolution where the marginal cost of energy is almost zero. Already about 25% of Germany’s electricity comes from renewables.

On that note, I am going to end with a fantastic interactive chart from The Economist (screenshot below) that outlines oil reserves around the world by country. If you click through to their website, you can then toggle the price of oil (per barrel) to see how much of those reserves are actually viable.

With the price of oil where it is today ($27.88 per barrel as of January 20, 2016), there are only a handful of countries with profitable oil. I am sure you could have guessed which ones.

What will happen if, or should I say when, that oil is no longer needed? 

This morning, I am looking at the following chart of average home prices in the Greater Toronto Area:

It’s from this Globe and Mail article.

These are staggering numbers. The average price of a detached home in the suburbs (905 area code) increased 21% year-over-year. In the city (416 area code), the increase was 19.6% YOY. These numbers are almost unbelievable.

The article focuses on low supply (decrease in listings) and high demand. And that is certainly a big part of what’s going on here in this city, as well as in many others.

But of course, the backdrop to all of this is our low / zero / negative interest rate environment.

Larry Summers has a great post on his blog (which I discovered this morning via Fred Wilson) that talks about this “remarkable financial moment.” In some instances, real interest rates are actually negative! (You should read his post.)

There are always people threatening that interests rates just have to go up. But Larry, as well as others, continue to argue that natural real interest rates are likely to remain close to zero going forward.

Fred mentions Albert Wenger on his blog this morning and I have written about him before as well, here. In his book World After Capital, Albert argues that capital is no longer the scarce resource of our time. Instead, it has become attention.

If you believe all of this to be true, then perhaps the numbers at the top of this post aren’t so unbelievable after all.

Earlier in the week, I came across this post (via Fred Wilson), arguing that rapid technological progress is causing systemic deflation in the broader economy.

Here’s a chart that illustrates the author’s point:

What is happening here is that despite advances in technology and increases in productivity, real wages have been stagnant for decades. (This chart is for the US, but it likely applies to many other countries.)

This is an interesting paradox. For a long time, increases in productivity were met with corresponding increases in income. So why the divergence?

The author believes that it’s because the gains brought about by “extreme technological progress” are being unequally applied to the economy. In other words, they do not benefit the majority of people. He then goes on to argue that we could be entering an entirely new macroeconomic era: 

“Economic growth may be over soon, at least in absolute terms. On the other hand that will be at least partially offset by the technological deflation. So instead of the decline of the innovation it will be just the opposite, the explosion of the innovation that will turn the economy to the decline. And moreover, it will not be a tragedy since we will be able to produce higher standard of living with fraction of the GDP today. Few adjustments needs to be done into our economic system to cope with the change for sure.”

When you read things like this it makes the idea of a “basic income guarantee” seem far more palatable.

The other chart that stood out to me was this one below, which shows the declining cost of solar panels and the rise of global solar panel installations. 

It’s a great reminder that it’s only a matter of time before we wean ourselves off of oil. And, that we could be headed towards some sort of third industrial revolution where the marginal cost of energy is almost zero. Already about 25% of Germany’s electricity comes from renewables.

On that note, I am going to end with a fantastic interactive chart from The Economist (screenshot below) that outlines oil reserves around the world by country. If you click through to their website, you can then toggle the price of oil (per barrel) to see how much of those reserves are actually viable.

With the price of oil where it is today ($27.88 per barrel as of January 20, 2016), there are only a handful of countries with profitable oil. I am sure you could have guessed which ones.

What will happen if, or should I say when, that oil is no longer needed?