I’ve thought a lot more than I’ve written about the Great Stagnation and whether or not we are simply seeing suboptimal monetary policy at the start of a new economic revolution.
Prices, properly measured, are collapsing and a subset of folks are rapidly shifting consumption towards those low cost areas. The Central Bank, failing to see this, keeps interest rates too tight. This explains a seemingly bizarre worldwide obsession with tight money at the very time that it seems most insane to say I am worse off today with a $1000 in cash than I would have been in 2000 with $1000 in cash.
For me, and I know I am an in infovore subset, there has been massive deflation.
However, the internet as the exclusive playground for infovores may be coming to an end. Social interactions may be the textiles of this new revolution. A product that almost every wants, that is suddenly becoming cheaper.
Facebook penetration is way up
The study, fielded in January of 2011, found that 51% of every teen, man or woman has a profile on this dominant site. That’s a majority of all Americans age 12-plus. And Edison Vice President Tom Webster, who presented the peek at the study in Arbitron’s monthly PPM client call, noted that the 51% is not just among those with Internet connections, but all Americans.
How is the BLS possibly supposed to measure this. I would suggest something akin to travel cost. But perhaps isolation costs. We could get this through experiments. Suppose I have a hotel which blocks Facebook and is out of range of 3G. How much does this knock off the daily rate versus other hotels with no 3G but do have Facebook access.
Even at $5 per night you you would be talking about $5*365*300M = 547B in annual GDP, priced out a zero dollars. That’s roughly 3% of national income, attributed to Facebook alone. Not advertising on Facebook mind you, but the economic value produced for users.
Is it that high? It could be lower but I could imagine it being higher possibly even $10 a night. And, of course there are increasing daily marginal costs to being cut off from Facebook. In the moderate percentage points of GDP is not unreasonable. Double digits seems unlikely but not widely implausible.
And of course, this is in theory just the beginning.