Space: Just Another Economic Frontier

A month or two ago, I wrote about the mind-bending, future altering impacts that SpaceX – the short name for Elon Musk’s Space Exploration Technologies Corporation focusing on aerospace manufacturing and transportation - would bring to mankind. 

I touched on the rocket launches and their near immediate recoveries, the software behind them, and using LaunchPorts instead of Airports in the future. 

Now, if you manage to read about some of the projects happening in Florida’s Cape Canaveral it seems like space travel will become as natural a discussion in about 15 years from now as talking about iPhones is today.

Generation Y is really moving.

The point here is that we seem to be consistently lost in the negatives and are missing the positives. 

We immediately buy into the "what if" bad stuff, proven or not, and then find out through the grace of time it was all just made up crap to get our attention. 

Heck we spent nearly half a year being convinced that North Korea was the devil in disguise, the same way we though of Russia during the early Reagan years.

Don't make the awkward mistake of thinking that the fear-laden negotiations between the US and North Korea (NoKo) were anything but a business deal; Kim was taken to Singapore, shown the lights and sounds of the town and told quietly that "if we play nice together, you can oversee something like this in a decade - and you will still be a young man. In the US we call it a joint venture. And this is how it works."

Now, I’m not saying anything about politics or past events.

I’m simply suggesting that we’re being led like a line of elementary school age children into believing there’s something to be afraid of on that day trip to NoKo, and making it too easy for the press to scare us over nothing if we do not really get what’s happening.

An Interest in Rates…

Shock horror: Interest rates rose again.

But the US Federal Reserve is not controlling anything; they are simply responding, and as much as quantitative easing (QE) was and is still completely understood by many, many really smart people, so too is the process we’re going through for the normalization of rates.

Now, be prepared to be told terrible things about this process bedded in with awful predictions of nightmarish collapses. 

That’s not to say that ugly times won’t come.

They will. We can never escape recessions, slowdowns and setbacks.  It's all part of the game. 

But, we also need to understand that rates rising a bit are a good thing – I mean, did you really want the economic patient to be in ICU forever - unable to move? 

But hey, “what about inflation Mike?  That's why rates are going up, right? It's out of control."  

Eh, no. Not really.

Check out these charts from Scott Grannis of the Calafia Beach Pundit:

There are a couple of things that we can take away from this data.

Note the noisy readings when you include crude oil in the inflation data (top chart - blue line). 

In the end, we don't want the US Fed trying to react to every hiccup in oil, right?  If that happened it would be changing directions in interest rates every six months. 

That would be insanity.

Now have a look at the second chart showing the long-term trend for inflation over many years. 

You can see we are right on the pathway that’s we’ve been on now for many years. 

In fact, the red box added for you on the second chart shows the time we got off track – that was back when everyone loved the world pre-2008/09. 

Housing prices were skyrocketing and so was oil; remember 2008 during the summer when oil was $148 a barrel and $5 a gallon at the pump. All was good with the world then, right?

Therein lies the lesson. 

Interest rates are rising because the economy is getting better.  And the better we get the higher rates will rise. 

The US Fed is not out to get you. 

Interest rates are rising because business is better.

And Generation Y is making that dream into a reality.