After all, the minimum cost for a good made in China is the cost of the raw materials (which is rising), the cost of clothing/feeding/sheltering the employees who assemble it (which is rising), and the cost of shipping it to its final destination (which is rising.) Even the cost of haircuts in Shanghai depends on how much it costs the barber to light his shop and feed his family.

In any event, the empirical data certainly suggests that while the change in the price of manufactured goods remains lower than that of commodities, these prices changes are now firmly positive:


3) Resources are finite. Oil. Food. Water. None of these grow on trees (OK, OK, some food does), and all are in demand by the new entrants to the global economy. And this demand is only going to increase as the new entrants become less poor in aggregate.

The implications, when combined with axioms one and two, are incredibly bullish for commodity prices over long periods of time. This is hardly a revelation, and indeed there are probably some pink flamingos as a result. For Macro Man, the more interesting impact of this axiom is the competition for resources. To date, the competition has been conducted along a set of agreed rules and codes of conduct. Call it the economic equivalent of 19th century warfare, with its fancy uniforms and official declarations and treaties.

Many of the new entrants were not part of that system and show little sign of wishing to join it. So the competition for resources will be more like the type of warfare that evolved in the second half of the 20th century: unconventional conflict wherein practitioners of traditional methods find themselves at a disadvantage against highly-motivated opponents employing guerilla tactics. China's investments into Africa are an example of this: they draw opprobrium from the West (no stranger itself to supporting morally bankrupt regimes!) , but help maintain the Chinese growth engine.

If these axioms are correct, then the world economy (and indeed the world, via the environment) are undergoing a tectonic shift. While it's easy to extrapolate the trends of the past few years into the future, as Friday's discussion highlighted, the true test comes under duress. If, in a few years' time, we can look at these three points and still call them axioms, then be prepared to change the way you live your life, for the world in the 21st century will be very different from the one that people of Macro Man's vintage grew up in.