May the source be with you, but remember the KISS principle ;-) Skepticism and critical thinking is not panacea, but can help to understand the world better
Financial skeptic
The more things change in the USA casino capitalism the more they stay the same
Cruise to Frugality Island for stock holding 401K Lemmings
Neoliberal economics (aka casino
capitalism) function from one crash to another. Risk is
pervasively underpriced under neoliberal system, resulting in bubbles small and large which hit the
economy periodically. The problem are not strictly economical or political. They are ideological. Like
a country which adopted a certain religion follows a certain path, The USA behaviour after adoption
of neoliberalism somewhat correlate with the behaviour of alcoholic who decided to booze himself to
death. The difference is that debt is used instead of booze.
Hypertrophied role of financial sector under neoliberalism introduces strong positive feedback look
into the economic system making the whole system unstable. Any attempts to put some sand into the wheels
in the form of increasing transaction costs or jailing some overzealous bankers or hedge fund managers
are blocked by political power of financial oligarchy, which is the actual ruling class under neoliberalism
for ordinary investor (who are dragged into stock market
by his/her 401K) this in for a very bumpy ride. I managed to observe just two two financial crashed
under liberalism (in 2000 and 2008) out of probably four (Savings
and loan crisis was probably the first neoliberal crisis). The next crash is given, taking into
account that hypertrophied role of financial sector did not changes neither after dot-com crisis of
200-2002 not after 2008 crisis (it is unclear when and if it ended; in any case it was long getting
the name of "Great Recession").
Timing of the next crisis is anybody's guess but it might well be closer then we assume. As Mark
Twain aptly observed: "A thing long expected takes the form of the unexpected when at last it comes"
;-):
This morning that meant a stream of thoughts triggered by Paul Krugman’s most
recent op-ed, particularly this:
Most of all, the vast riches being earned — or maybe that should be “earned” —
in our bloated financial industry undermined our sense of reality
and degraded our judgment.
Think of the way almost everyone important missed the warning signs of an impending crisis.
How was that possible? How, for example, could Alan Greenspan have declared, just a few years
ago, that “the financial system as a whole has become more resilient” — thanks to derivatives,
no less? The answer, I believe, is that there’s an innate tendency
on the part of even the elite to idolize men who are making a lot of money, and assume that they
know what they’re doing.
As most 401K investors are brainwashing into being "over bullish", this page is strongly bearish
in "perma-bear" fashion in order to serve as an antidote to "Barrons" style cheerleading. Funny, but
this page is accessed mostly during periods of economic uncertainty. At least this was the case during
the last two financial crisis(2000 and 2008). No so much during good times: the number of visits drops
to below 1K a month.
It was clear that 2017 stock market run was detached from fundamentals. Mostly speculative run. And the current stock market
decline could well happen three months aerler or three month later but it was in the cards. It is difficult to estimate the power of
inertia in such speculative runs. Also layoffs and decline of the standard liming of workers and lower middle class still can
continue to improve the balance sheet until "Yellow Vests" moment stops them.
Jobs created now are mostly "inferior" low paid or temp/contractor jobs and the numbers just mask the cruel reality of the USA
job market.
Which in reality is dismal, especially for young and old workers. several more or less paid specialties disappeared in 2018 due
to automation (cash office worker is one). automatic cashier is supermarkets are also now more visible. So spontaneous cases
of vandalism, killings of coworkers and other form of "action of desperation" (as well as the rate of death from opioids -- which is
yet another form of the same) would not be too surprising in such an atmosphere. Even with the power of the current national
security state. Trump is playing with fire trying to cut on food stamps and implementing some other action in this program of
"national neoliberalism" which is in internal policy is almost undistinguishable from neofascism. He risk facing "Macron
situation" sooner or later.
In any case at some point Minsky moment should arrive for the stock market. I am not sure that the current decline is that start
of such an event. It might be postponed further down the line for a year or two. But it will eventually come. We can
only guess what form it might take, but with the current Apple troubles and valuations of tech sector I think it might take the form
of something similar to dot-com bubble deflation No.2
I do not see Amazon, Google, Facebook and Microsoft and other tech high flyers completely immune to the stock crash of 50%
magnitude or more. For example, Google is overly dependent on advertising revenue which can grow only by strangulating small sites
owners which use it as the advertizing platform (which it successfully implements fro several years now). But at some point owners
might revolt and start dropping it for Microsoft or other platform. Facebook might face a backlash, if people understand that
selling data about them in the part of the business model, not an aberration.
One of the most unexplainable things that happened in 2018 was dramatic fall of oil prices in the Q4. This was quite surprising
(and destructive) after the period of little or no capital investment in the new fields for three years or so. Shale oil
production increases in the USA are only possible if junk bonds can be produced along with it. Junks bonds that will never be paid.
With the current debt load and prices below $50 most of the USA shale oil companies are zombies. Most if not all of thenm are losing
money. Only return of ~$70 oil prices can save them, if anything at all. WSJ touched this topic recently.
So this surprising fall of oil prices (from around $70 to around $43 WTI) looks connected to the speculations in the "paper oil"
market.
Financialization allows for oil price to be completely detached from fundamentals for a year or even two (Saudis need over $80 I
think to balance the budget, I think; this represents "fair price" as they are one of the three largest producers).
But you will never know this unless there are shortages at gas stations. The difference is covered by inflated statistics from
IEA and similar agencies as well as "paper oil" -- future contracts which are settled in dollars.
This is the reality of "casino capitalism" ( aka neoliberalism ) with its rampant and destructive financialization.
Formation of the ruling classes has a close relation with the level of civilization and the
type of society. Ruling class under every condition try to reproduce itself particularly by
domination on political forces like power, wealth and the ruling class tends to be come
hereditary. In fact, descents of ruling class members have a high life chances to have the
traits necessary to be a ruling class member (Mosca 1939, pp. 60-61). In general, prior to
democracy, membership of ruling class was not only de facto but also de jure. In democracy, de
jure transfer of political possession to descendants of ruling class members impossible and not
legitimized but it is now de facto.
According to Mosca, historically, ruling class try to justify its existence and policies by
using some universal moral principles, superiority etc., lately, scientific theory and
knowledge like Social Darwinism, division of labor is also employed for the same purposes.
Mosca particularly rejects these two theses to use in political purposes. To Mosca, at a
certain level of civilization, ruling classes do not justify their power exclusively by de
facto possession of it, but try to find a moral and legal basis for it. This legal and moral
basis or principles on which the power of the political class rests is called "political
formula" by Mosca. The formula has a unique structure in all societies.
"lTjhe political formula must be based on the special beliefs and the strongest sentiments
of the current social group or at least upon the beliefs and sentiments of the particular
portion of that group which hold political preeminence"(Mosca 1939, p.71,72).
In fact ruling class like Pareto's elite strata consist of two strata: (a) the highest
stratum; and (b) second stratum. The highest stratum is the core of the ruling class but it
could not sufficiently lead and direct the society unless the second stratum helps. Second
stratum is the larger than the higher stratum in number and has all the capacities of
leadership in the country. Even autocratic systems do have it. Not only political but also any
type of social organization needs the second stratum in order to be possible (Mosca 1939,
p.404, 430).
The members of the ruling class are recruited almost entirely from the dominant, majority
group in the society. If the society has a number of minorities and if this rule is not
followed due to weaknesses of dominant group, political system can meet serious political
crisis. The same thing occurs when there are considerable differences between in the
culture, and in customs of the ruling class and subject classes (Mosca 1939, p.l05,106-7).
Weaknesses of dominant group in society and isolation of lower classes from the ruling
classes can lead to political upheaval in the country and as a result of this upheaval subject
classes' representatives can have places in the ruling class. Because when isolation takes
place, another ruling class emerges among the subject classes that often hostile to the old
ruling class (Mosca 1939, pp. 107- 8). Furthermore, due to reciprocal isolation of classes,
the character of upper classes change, they become weak in bold and aggressiveness and richer
in "soft" remissive individuals. On the same track, when there is fragmentation in the
society, new groups form and each one of them makes up of its own leaders and followers. In
fact, revolutions are another source of replacement of ruling class (Mosca 1939, p.163,
199).
When Mosca compares the political systems, he says that communist and socialist societies
would beyond any doubt managed by officials and he sees these regimes as utopia. On democracy,
he says, although gradual increase of universal suffrage, actual power has remained partly in
wealthiest and the middle classes. At the same time, for Mosca, middle class is necessary
for democracy, and when middle class declines, politic regimes in democratic countries turns to
a plutocratic dictatorship, or bureaucratic dictatorship. (Mosca 1939, p.391).
According to Mosca, ruling class has a responsive character to social change in the society
and there is a close relation between level of civilization and character of ruling classes.
According to these two complementary proposition, it can be said that ruling class is subject
of social change rather than actor of it. For example, change in division of labor from lower
to higher and change in political force from military to wealth have changed the type of state
from federal to bureaucratic state (Mosca 1939, p. 81, 83 ). There it seems that Mosca admits a
linear social change in history, as opposite to Pareto.
As seen, Mosca's theory is basically based on organized minorities' superiority over
unorganized majority. This organized minority consists of ruling class, but for Mosca it is not
necessarily mean that always interest of ruling class and subject classes are different. To him
,in contrast they coincide many times. He saw the future of socialist system by saying that it
will be governed by officials.
This feature of socialist system is well documented by Milovon Dijilas in his work: New
Classes. But Mosca failed to see that one day, majority will also be able to organize. As C. W.
Mills pointed put, democratic western societies have experienced important transformations: (1)
from the organized minority and unorganized majority to relatively unorganized minority and
organized majority, and (2) from the elite state to an organized state.( Mills 1965, pp.
161-162).
Therefore minorities and elites in today's society are less powerful than majorities. Elites
have relatively lost their privileges, and more importantly, their monopoly over society.
"... Elites are a small proportion of the population (on the order of 1 percent) who concentrate social power in their hands (see my previous post and especially its discussion in the comments that reveal the complex dimensions of this concept). In the United States, for example, they include (but are not limited to) elected politicians, top civil service bureaucrats, and the owners and managers of Fortune 500 companies (see Who Rules America? ). ..."
"... As individual elites retire, they are replaced from the pool of elite aspirants . There are always more elite aspirants than positions for them to occupy. Intra-elite competition is the process that sorts aspirants into successful elites and aspirants whose ambition to enter the elite ranks is frustrated. Competition among the elites occurs on multiple levels. ..."
"... Excessive elite competition, on the other hand, results in increasing social and political instability. The supply of power positions in a society is relatively, or even absolutely, inelastic. For example, there are only 435 U.S. Representatives, 100 Senators, and one President. A great expansion in the numbers of elite aspirants means that increasingly large numbers of them are frustrated, and some of those, the more ambitious and ruthless ones, turn into counter-elites . In other words, masses of frustrated elite aspirants become breeding grounds for radical groups and revolutionary movements. ..."
"... Intense intra-elite competition, however, leads to the rise of rival power networks, which increasingly subvert the rules of political engagement to get ahead of the opposition. Instead of competing on their own merits, or the merits of their political platforms, candidates increasingly rely on "dirty tricks" such as character assassination (and, in historical cases, literal assassination). As a result, excessive competition results in the unraveling of prosocial, cooperative norms (this is a general phenomenon that is not limited to political life). ..."
"... Because the supply of power positions is relatively inelastic, most of the action is on the demand side. Simply put, it is the excessive expansion of elite aspirant numbers (or "elite overproduction") that drives up intra-elite competition ..."
"... There are two main "pumps" producing aspirants for elite positions in America: education and wealth. On the education side, of particular importance are the law degree (for a political career) and the MBA (to climb the corporate ladder). Over the past four decades, according to the American Bar Association, the number of lawyers tripled from 400,000 to 1.2 million. The number of MBAs conferred by business schools over the same period grew six-fold (details in Ages of Discord ). ..."
"... It's contradictory to bemoan the spread of the 'neoliberal' ethos, and simultaneously talk about elite fragmentation. The evidence Turchin marshalls for elite fragmentation is basically the bimodal distribution of lawyers' incomes, and the degree of legislative polarisation. He ignores the much wider evidence of capitalist unity and concentration in support of 'neoliberal' policies. ..."
"... while elites have colluded to capture the political process we might not expect them to all agree on what to do with the political process once it has been captured. ..."
"... There is no intra-capitalist unity. Some elites shouldn't even be called capitalists because the monopoly power they seek completely eliminates the free market. Other elites who want to control the political process do want a free market. They are in conflict. ..."
"... The concept of "ecological overshoot and collapse" applies to human ecology too. We're certainly in overshoot, so some form of collapse is coming (even if a technological miracle occurred, like cheap energy from nuclear fusion, it would only postpone the day of reckoning). ..."
"... As to "intra-elite competition", it is well underway in much of the upper middle class and the 1%, according to the statistics documented by Peter Turchin above. But it is just revving up among the super-elites – the billionaire class, with Trump being the first really visible eruption. ..."
"... When an imperial economy can longer expand easily, all of Peter's dynamics come into play with greater force, not just the elite competition, but the increasing exploitation of the common people in order to maintain elite expansion. The latter has been going on since Reagan in the form of escalating economic inequality. = popular immiseration. ..."
"... I liked the intra-elite discussions in "Ages of Discord" and it made me an even more strident believer in term limits. At least moving people out of the Congress after eight years will "free up" some space for other elite aspirants. ..."
"... Political elites are the proxies PT uses as evidence for his theory, but as he himself says, "American power holders are wealth holders". And I believe the definition I have effectively used here, "owners of capital", is consistent with his concept of elites or magnates in Secular Cycles -- a book I admire tremendously. ..."
"... Your average Congressman is not as powerful today as he was 100 years ago. Cabinet members used to do something of substance and now act more like front men, while policy making is centralized in the White House. You have more and more aspirants for fewer and fewer positions of substance. That ramps up intensity of competition even more than just over-production of JDs and MBAs. ..."
"... Agreed, the overproduction of elites developed in parallel with the change in social norms that extolled competition and downplayed cooperation. But these two dynamics may be causally related -- it's not a pure coincidence that the two trends developed in parallel. ..."
"... It seems to me that one of the most important factors in intra-elite competition, is the degree of skill of the frustrated aspirants. If there are lots of people who want to be elite but can't crack the system to get in, that may not be a problem if those frustrated aspirants aren't particularly good at organization, motivation, leadership, etc. ..."
"... If, on the other hand, the frustrated aspirants are nearly as good at this sort of thing as those actually in power, and especially if they are better at it than the incumbents (who somehow through tradition or family connections or what-have-you remain on top), then you have a much better chance of the frustrated aspirants being able to kick up trouble. ..."
"... I wonder if any of the commentators here have considered that the [neoliberal] cabal now in power in the US (not elsewhere) are not in power to "take power" except for a temporary period. They don't want to run the federal government, they want to destroy it, except for the police state and the military. ..."
Intra-elite competition is one of the most important factors explaining massive waves of
social and political instability, which periodically afflict complex, state-level societies.
This idea was proposed by Jack Goldstone
nearly 30 years ago . Goldstone tested it empirically by analyzing the structural
precursors of the English Civil War, the French Revolution, and seventeenth century's crises in
Turkey and China. Other researchers (including Sergey Nefedov, Andrey Korotayev, and myself)
extended Goldstone's theory and tested it in such different societies as Ancient Rome, Egypt,
and Mesopotamia; medieval England, France, and China; the European revolutions of 1848 and the
Russian Revolutions of 1905 and 1917; and the Arab Spring uprisings. Closer to home, recent
research indicates that the stability of modern democratic societies is also undermined by
excessive competition among the elites (see Ages of Discord for a
structural-demographic analysis of American history). Why is intra-elite competition such an
important driver of instability?
Elites are a small proportion of the population (on the order of 1 percent) who
concentrate social power in their hands (see my previous post and especially
its discussion in the comments that reveal the complex dimensions of this concept). In the
United States, for example, they include (but are not limited to) elected politicians, top
civil service bureaucrats, and the owners and managers of Fortune 500 companies (see
Who Rules America? ).
As
individual elites retire, they are replaced from the pool of elite aspirants . There are
always more elite aspirants than positions for them to occupy. Intra-elite competition
is the process that sorts aspirants into successful elites and aspirants whose ambition to
enter the elite ranks is frustrated. Competition among the elites occurs on multiple levels.
Thus, lower-ranked elites (for example, state representatives) may also be aspirants for the
next level (e.g., U.S. Congress), and so on, all the way up to POTUS.
Moderate intra-elite competition need not be harmful to an orderly and efficient functioning
of the society; in fact, it's usually beneficial because it results in better-qualified
candidates being selected. Additionally, competition can help weed out incompetent or corrupt
office-holders. However, it is important to keep in mind that the social effects of elite
competition depend critically on the norms and institutions that regulate it and channel it
into such societally productive forms.
Excessive elite competition, on the other hand, results in increasing social and political
instability. The supply of power positions in a society is relatively, or even absolutely,
inelastic. For example, there are only 435 U.S. Representatives, 100 Senators, and one
President. A great expansion in the numbers of elite aspirants means that increasingly large
numbers of them are frustrated, and some of those, the more ambitious and ruthless ones, turn
into counter-elites . In other words, masses of frustrated elite aspirants become
breeding grounds for radical groups and revolutionary movements.
Another consequence of excessive competition among elite aspirants is its effect on the
social norms regulating politically acceptable conduct. Norms are effective only as long as the
majority follows them, and violators are punished. Maintaining such norms is the job for the
elites themselves.
Intense intra-elite competition, however, leads to the rise of rival power networks, which
increasingly subvert the rules of political engagement to get ahead of the opposition. Instead
of competing on their own merits, or the merits of their political platforms, candidates
increasingly rely on "dirty tricks" such as character assassination (and, in historical cases,
literal assassination). As a result, excessive competition results in the unraveling of
prosocial, cooperative norms (this is a general phenomenon that is not limited to political
life).
Death of Gaius Gracchus (François Topino-Lebrun)
Source
Intra-elite competition, thus, has a nonlinear effect on social function: moderate levels
are good, excessive levels are bad. What are the social forces leading to excessive
competition?
Because the supply of power positions is relatively inelastic, most of the action is on the
demand side. Simply put, it is the excessive expansion of elite aspirant numbers (or "elite
overproduction") that drives up intra-elite competition. Let's again use the contemporary
America as an example to illustrate this idea (although, I emphasize, similar social processes
have operated in all complex large-scale human societies since they arose some 5,000 years
ago).
There are two main "pumps" producing aspirants for elite positions in America: education and
wealth. On the education side, of particular importance are the law degree (for a political
career) and the MBA (to climb the corporate ladder). Over the past four decades, according to
the American Bar Association, the number of lawyers tripled from 400,000 to 1.2 million. The
number of MBAs conferred by business schools over the same period grew six-fold (details in
Ages of Discord ).
On the wealth side we see a similar expansion of numbers, driven by growing inequality of
income and wealth over the last 40 years. The proverbial "1 percent" becomes "2 percent", then
"3 percent" For example, today there are five times as many households with wealth exceeding
$10 million (in 1995 dollars), compared to 1980. Some of these wealth-holders give money to
candidates, but others choose to run for political office themselves.
Elite overproduction in the US has already driven up the intensity of intra-elite
competition. A reasonable proxy for escalating political competition here is the total cost of
election for congressional races, which has grown (in inflation-adjusted dollars) from $2.4
billion in 1998 to $4.3 billion in 2016 ( Center for Responsive
Politics ). Another clear sign is the unraveling of social norms regulating political
discourse and process that has become glaringly obvious during the 2016 presidential
election.
Analysis of past societies indicates that, if intra-elite competition is allowed to
escalate, it will increasingly take more violent forms. A typical outcome of this process is a
massive outbreak of political violence, often ending in a state collapse, a revolution, or a
civil war (or all of the above).
Works for China too. One can see two main sources: The Imperial family, which with
vast-scale polygyny grew inordinately in a short time; and the examination system,
producing more and more successful candidates over time (this was a problem mainly after
Song greatly expanded the exams). The poor Imperial family deserves some pity–toward
the end of a dynasty you had all these 13th cousins 10 times removed starving to death on
the Russian frontier. (I exaggerate only slightly. By the end of the empire in 1911, there
were tens of thousands of Imperial relatives.) Naturally the competition got pretty fierce
late in the dynasties. When the empire thrived, the system could blot all these people up,
and find places for them. When the empire was going down hill, or conflicted, it meant
trouble.
I believe Peter Turchin is deeply mistaken about elite competition in modern societies.
I repeat my comment on intra-elite competition from a previous post:
In an agrarian society, elite wealth was based on land, more specifically, on extracting
a fraction of the output of the commoners working the land. When there was a demographic
crisis (land-labour ratio fell and immiseration set in), elite incomes fell, and elites
sought to maintain their lifestyles by increasing the rate of extraction. But squeezing
peasants even more when there's already a demographic crisis only exacerbates popular
immiseration. At some point the only way for elites to increase, or even just preserve,
their incomes was at the expense of other elites. Thus you have elite fragmentation and
internecine competition. And thus sociopolitical instability. Makes a lot of sense. It fits
a lot of historical cases.
However, this theory makes no sense in modern industrial societies.
(1) Wealth is no longer fixed in the long run. Modern economies reliably grow at 1-2%
rates. Much of that growth is concentrated at the top, even when measured income inequality
is relatively low. So the competitive pressure within elites is much less than in any
agrarian society governed by Malthusian-Ricardian-Brennerian-Goldstone-Turchin cycles.
(2) Besides, in a modern society, you need *more*, not less, intra-elite cooperation (a)
in order to increase economic inequality; (b) in order for the elites to capture a greater
share of the economic growth; (c) in order for capitalists reduce the bargaining power of
labour; and (d) in order for elites to capture the state.
In fact, politics in a modern society is a pretty small part of the field in which elites
can play compared with anti-competitive practices -- i.e., collusion, mergers, monopolies,
trusts, and other ways of reducing competition and concentrating power in the supply of
goods and the demand for labour. These are all acts of elite cooperation. Capitalists are,
right now, in unprecedented unity. They agree on unions, immigration, wages, trade,
regulations, etc. That unity is necessary to generate the inequality in the first
place.
Therefore, state capture and rent-seeking are now *cooperative*: conspiracies to rig the
rules and increase markups against the public interest require collusion. Owners of one
mobile telephony operator don't have to clash with the owners of another mobile telephony
operator: they can band together to lobby the government. Compared with the rise of
monopoly concentration, elites wrangling over Trump or Brexit is a sideshow.
Almost everybody who is concerned about rising inequality implicitly recognises this:
from Krugman to Stiglitz to Milanovic to even Turchin's friends at Evonomics, they have
argued that inequality stems in great measure from anti-competitive practises.
It's contradictory to bemoan the spread of the 'neoliberal' ethos, and simultaneously talk
about elite fragmentation. The evidence Turchin marshalls for elite fragmentation is
basically the bimodal distribution of lawyers' incomes, and the degree of legislative
polarisation. He ignores the much wider evidence of capitalist unity and concentration in
support of 'neoliberal' policies.
Fernando E.Mora December 31, 2016 at 4:05 am
I think you must read Fred Hirsch's "Social Limits to Growth" to understand the
difference between the always possible growth in MATERIALl wealth and the (no-)growth
of POSITIONAL wealth in which Peter's point can also be solidly (and perhaps more
accurately) based.
I would certainly agree that if economic growth were zero or negative, PT's
elite competition theory might make more sense. Which is why I think SD theory is
still quite applicable to many contemporary developing countries, such as those in
the Arab world. Also, the collapse into civil wars in many African countries in the
1980s and 1990s was preceded by a large expansion of educated people at the same
time economic growth more or less came to a halt.
Peter Turchin January 1, 2017 at 7:17 pm
This comment requires a lengthier rebuttal, but for now just two points:
1. In the blog post I specifically used the political elites to illustrate my major
point. Your response, unfortunately, is a standard economic one that measures
everything in money. As I said, I will probably have to write another post to explain
why this is wrong-headed.
2. Why do you assume that the "capitalist class" will be automatically able to
cooperate to impose their will on the rest of the society? There is, after all, the
problem of collective action.
Stephen Morris January 1, 2017 at 8:04 pm
Speaking as a former investment banker involved in the privatisation of public
assets – who has seen at first hand generations of politicians captured by
business interests – I suggest that anyone with direct experience of this
matter would realise that any collective action problem faced by the capitalist
class in negligible in comparison which the collective action problem faced by
citizens under the non-democratic system of purely "elective" goverrnment (i.e.
"government-by-politicians').
Re #1 -- No, I do not measure everything in money, so please do not write a
whole post as though that's what I argued. I said that elites now *collude* to
capture the political process, which they do. They don't need to compete for
political positions because they cooperate in capturing it. Goldman Sachs has
access to the Treasury department whether the party in power is Republican or
Democratic. (Besides, you also use some money proxies for intra-elite
competition/cooperation: the distribution of lawyers' salaries, or the Great Merger
Movement.)
Re #2 -- I do not assume it. The evidence is overwhelming that concentration is
increasing, markups are rising, monopoly power is expanding. All of that is
evidence of intra-capitalist cooperation and unity.
Peter Turchin frequently cites the work of Martin Gilens, who has repeatedly
shown that public policy largely reflects the preferences of the very richest of US
society. That's not elite competition. That's elite cooperation in capturing of the
political process. The problem with Turchin's framework is that he sees even modern
societies through the Roman framework of Optimates v. Populares.
edwardturner January 2, 2017 at 11:52 am
pseudoerasmus, I pretty much agree with what you say. However, while elites
have colluded to capture the political process we might not expect them to all
agree on what to do with the political process once it has been captured.
There is no intra-capitalist unity. Some elites shouldn't even be called
capitalists because the monopoly power they seek completely eliminates the free
market. Other elites who want to control the political process do want a free
market. They are in conflict.
The common thread here is the presence of powerful elites who cooperate.
Historically the monopoly power elites have cooperated without much resistence
but the free market elites have begun to cooperate against them and have had
success in the election of Donald Trump.
If it is people power we want then the general trend will look like
cooperation as whoever wins the conflict will be cooperating economic
elites.
I question whether there is a qualitative difference today. It's still about the
claims embodied by "wealth," and the power those claims impart to wealthholders. The
mechanisms are different, but the wealth/power relationships are pretty much the
same.
The crux, in my view, is concentration of wealth (hence power). Which has the virtue
of being nicely quantifiable, in concept if not necessarily in practice.
As concentration increases and the "elite" gets smaller, the rope-ladder hanging
down from the elite gets shorter and rattier. eg: The 90% were always excluded. Now the
2%-10% are. That change could result in a different type or intensity of social
conflict.
On the other hand that intra-"elite" competition might just be a by-product and
analytical distraction. The elite vs "the rest" is the issue, and all we need to look
at is the size of the elite. That could be nicely encapsulated in a "wealth
concentration" metric.
Problem is getting a consistent measure of that wealth concentration. Hell, the U.S.
national accounts didn't even tally wealth until 2006, and still don't even touch on
wealth distribution.
Assembling such a (validly consistent) measure across historical societies would be
tough. Atkinson, Wolff, Piketty&Co, etc. have managed over recent decades to
assemble data on richer countries going back a century or so. Perhaps one could do
similar for the Roman Empire, at least roughly? But across many societies and
millennia? Tough.
In agrarian societies, the wealth that conferred status -- land and state
offices -- were fixed in the long run. In modern societies, the supply of status
positions is not fixed and is in fact highly elastic.
Yes the quantity of wealth was fixed. But I'm talking about the
concentration of wealth and power. Compare a society in which the 1% has all
the wealth and (real) power, compared to one where it's more broadly
distributed among the 10%.
IOW, whaddaya mean by "elite," buster?
>the supply of status positions is not fixed and is in fact highly
elastic
Totally agree. Increasing wealth does not mean that the quantity of
status positions is increasing. The absolute or percentage count of "the elite"
could shrink (wealth could concentrate) even as wealth increases.
Increasing wealth might be presumed to give more entree to aspirants than a
fixed-wealth scenario, but I just have no idea whether that is actually the
case.
Dick Burkhart December 30, 2016 at 6:47 pm
You claim that "wealth is no longer fixed in the long run", yet that claim is the most
fundamental fallacy of contemporary economics. "Limits-to-growth" is not a choice but a
fact of science. Already the global economy is stagnating, mostly for this reason, and it
is headed toward contraction sometime during the coming generation, despite all the hype
about new technologies.
The concept of "ecological overshoot and collapse" applies to human ecology too. We're
certainly in overshoot, so some form of collapse is coming (even if a technological miracle
occurred, like cheap energy from nuclear fusion, it would only postpone the day of
reckoning).
As to "intra-elite competition", it is well underway in much of the upper middle class
and the 1%, according to the statistics documented by Peter Turchin above. But it is just
revving up among the super-elites – the billionaire class, with Trump being the first
really visible eruption. In fact, Donald Trump's election is the perfect example of how
this competition plays out once it hits the main stage. So don't confuse tactical
cooperation among increasingly greedy factions of the elites with the kind of yawning
political fractures that are now opening up as unscrupulous opportunists like Trump
discover that they can exploit a disgruntled part of the populace to "trump" the more
conventional elites. And as "limits-to-growth" blocks the customary relief valve of
expansion, then elite exploitation and popular revolt will increase until something there
is some kind of show stopper.
Dick Burkhart December 30, 2016 at 8:29 pm
Like most economists, you've got it totally backward: The non-material part is
completely dependent on cheap resources, especially cheap, and compatible ecosystem
conditions. Those resources only seem to disappear from the economy, because they
are so cheap. But, as in the rest of nature, all that complexity comes from the
surplus of energy and other resources.
After all, we could not live without good air. Yet it costs nothing most of the
time, so doesn't even enter into conventional economics.
Well, Dick Burkhart, as I said earlier, even if ecological exhaustion and
collapse were coming, (a) that is not related to current economic problems; and
(b) it's also not part of Peter Turchin's diagnosis.
Dick Burkhart December 31, 2016 at
9:19 pm
In fact climate change is already taking an increasing economic toll
– from extreme weather events, ocean acidification, desertification
in some areas, etc. These costs could increase rapidly if certain tipping
points are reached.
But, yes, the larger immediate effects are coming from resource
depletion, especially the peaking of conventional oil in 2006.
Unconventional oil, like tar sands and fracked oil, is much more expensive,
hence produces less wealth, less economic growth. Even much of the newer
conventional oil is less productive, as it is often harder to
find or requires tertiary methods of recovery. Similar dynamics apply to
coal, natural gas, and many other resources, except that depletion may not
be as far advanced as for oil. Economic growth has slowed dramatically even
in China, despite their phony growth numbers, and I expect increasing
political turmoil there, too, over the next decade or two.
When an imperial economy can longer expand easily, all of Peter's
dynamics come into play with greater force, not just the elite competition,
but the increasing exploitation of the common people in order to maintain
elite expansion. The latter has been going on since Reagan in the form of
escalating economic inequality. = popular immiseration.
Paolo Ghirri December 31, 2016 at 2:34 pm
"current problems have nothing to do with anything ecological or resource
constraints."
yes they have: for a pre industrial civilization what is vital is energy
surplus, energy surplus that came from agriculture production. so as an example 18
have to work to produce food and 2 can live as soldier, priest and so on.
for a
industrial civilization energy surplus came from oil. from 1973 to 2016 the energy
surplus pro-capita is falling: in a developed country the pro capita surplus now is
75% lower than in 1973.
the gap is covered with debt. so in the short run we have:
1) energy price escalation (in real term the 2016 average oil price is the double
of 2000) 2) agricultural stress: more frequent spike in food price, combined with
food shortfall in the most vulnerable country (arab spring: food price in 2011 are
229% higher than the 2000-2004 average) 3) energy sprawl: investment in energy
infrascructure will absorb rising proportion 4) economic stagnation: fail to
recover from setbacks as robustly as it has in the past 5) inflation
with the single exception of inflation (but if we check only necessary to live item
i'm not so sure) all of the above features has already become firnly established in
recent years, wich underlines the point that energy-surplus economy has reached its
tipping point
Terry Lowman December 30, 2016 at 7:20 pm
The reason the elites cooperate is to get a leg up in the competition. It recently
occurred to me that the Forbes 400 list of America's wealthiest families gives people a
rank, a competitor. Without the list, one might be complacent with a mere $3 billion, but
knowing others have tens of billions, makes you a "just ran". Better tune up your
capitalist machine so you can outshine everyone else, right?
Peter Turchin January 1, 2017 at 7:19 pm
The supply of "status" is by its nature inelastic. There is only one top person in
anything, and only ten in the Top 10.
edwardturner January 2, 2017 at 11:57 am
True but people who cannot be the king of general things will be happy to be
known as the king of their specialism.
The more specialisms that exist for people to get to the top of the more stable
a society will be.
edwardturner January 2, 2017 at 12:02 pm
you could say that the king of the military is the king of kings but in the age
of nuclear buttons it's simply boring. you can't blow anything up without getting
blown up yourself. you can use non-nuclear military power but non-nuclear power in
the age we are living in only wins you the war, it doesn't win you the war and the
peace. to win the peace today you need to be king of something other than the
military.
Rick Derris December 30, 2016 at 9:50 pm
I liked the intra-elite discussions in "Ages of Discord" and it made me an even more
strident believer in term limits. At least moving people out of the Congress after eight
years will "free up" some space for other elite aspirants. I don't care if your politics
are on the side of Strom Thurmond or Ted Kennedy – both were in the Congress for far
too long.
Of course, term limits did nothing to keep a 2nd Cuomo out of the NY Governor's mansion,
but at least it means we only have to watch one Cuomo on CNN.
Rich December 31, 2016 at 1:09 am
Pseudoerasmus, good arguments. The consolidation of money, as well as markets, is very
large right now and it does seem like that would take coordination of an ownership class or
at least similar lines of thinking among those elites. But, are we talking about a
different set of elites? There may be different populations of elites: capitalist and
political. Personally, I think the proxies Peter use describe a political elite population
rather than a capitalist elite population. The two combine for many, but there may be
distinct capitalist and political populations with each having distinct behavior patterns.
The worrisome insight for me is that it's the political elites that end up bringing us to
our knees.
"Personally, I think the proxies Peter use describe a political elite population
rather than a capitalist elite population.
Political elites are the proxies PT uses as evidence for his theory, but as he
himself says, "American power holders are wealth holders". And I believe the definition
I have effectively used here, "owners of capital", is consistent with his concept of
elites or magnates in Secular Cycles -- a book I admire tremendously.
Note also that PT uses the Great Merger Movement in US history (1895-1905) as
evidence of the beginnings of elite cooperation. Well, another wave of capital
concentration has existed now for decades, since the 1980s.
Rich Howard December 31, 2016 at 4:40 pm
Political elites may be more likely to be rich, but the rich is a larger
population with only a fraction politically aspirant. PT'S model relates political
aspirants to political breakdown. And because it works so well, in so many cases,
it suggests there is a more universal social process at work than rich/poor,
unemployment rates, too many weapons, resource depletion etc.
Jason December 31, 2016 at 7:42 am
I like the theory but isn't there more to the story. On one side you have elite aspirant
overproduction. On the other side, you have increasing concentration of power -- the iron
law of oligarchy (in the sense of this wikipedia link: https://en.wikipedia.org/wiki/Iron_law_of_oligarchy
)
Your average Congressman is not as powerful today as he was 100 years ago. Cabinet
members used to do something of substance and now act more like front men, while policy
making is centralized in the White House. You have more and more aspirants for fewer and fewer positions of substance. That ramps
up intensity of competition even more than just over-production of JDs and MBAs.
Plus the barriers to entry for competition has lowered too. Now celebrities fight with
JDs for political positions. Rap stars compete with MBAs for business tycoon success.
At all levels of society, you have greater and greater competition for fewer and fewer
rewards. Hyper-competition all around. Now perhaps the competition at the gateway to the
elite is particularly important because elites are important, and failure to get in makes
them the aspirants powerful disgruntled people, but I think the mechanism is more than just
over-production of JDs and MBAs.
I think it might have started as a well intentioned project to increase the quality of
our elites by introducing competition and lowering barriers to entry. And at the the same
time, increasing the rewards to winners (incentivizing max effort). Result though is brutal
intra-elite fighting. Particularly in times of overall lowered growth.
Peter Turchin January 1, 2017 at 7:24 pm
Agreed, the overproduction of elites developed in parallel with the change in social
norms that extolled competition and downplayed cooperation. But these two dynamics may
be causally related -- it's not a pure coincidence that the two trends developed in
parallel.
One point I haven't seen discussed much is that the number of "powerful" positions is
fixed, by law, but not unchangeable. For example, in the 19th century it was arguably more
important to be a city councilman or state legislator than a Congressmen, because more
actual decisions were being made at the city and state level and the percentage of the
economy under the control of the federal government was smaller. If there is less federal
largesse to distribute, then there is less power in helping to decide how it is
distributed. It is somewhat analogous to why being a U.S. Senator now is more important
than being a U.N. functionary; the United Nations may represent a larger domain, but it has
a lot less control over that domain than a national government.
Thus, one would expect that the more centralized control of a region is, the more
intra-elite competition there will be, because there are fewer positions which really
matter. A modern example of this might be that the transfer of power from national to
European Union administration would result in more intra-elite competition. On the other
hand, devolving power back down to a lower level would result in more positions that have
some power, and less competition for each.
Jason January 1, 2017 at 12:49 am
That's exactly what I was getting at too, Ross. The number of good positions
available depends on the power gradient of the society. How much power is centralized
vs distributed. The whole Iron Law of Oligarchy developed in recognition that over
time, power tends to centralize, so it's not fixed by law and unchangeable for all
time. It's not so much inequality between ordinary people and the elite, but among
elites.
Plus it ossifies, in that these enhanced elite positions are then passed out
patrilineally, which results in fewer actual positions being open to aspirants.
The net result is heightened competition for entry and promotion within the elite,
with more and more of the victories happening by methods outside the norm, e.g. dirty
tricks, patronage, fake news etc.
This probably happens in all societies, but growth (creating more opportunities),
wars (resetting the table), inefficiency (placating the failed aspirants with
consolation prizes) keep internal collapse at bay. It's when you have a dynamic of High
Inequality, Low Growth, High Efficiency / Lean, No Wars that Elite Competition starts
getting out of hand.
(I say this despite hating wars, but you can't argue with their effect on resetting
the table. Hate bribes/corruption too, but things like congressional pork barrels kept
congressman feeling important and in-line. Efficiency is also a self evident good, but
that means no consolation prizes for failure. Growth may eventually run into limits due
to carrying capacity of ecosystem .).
To me, it resembles a game of musical chairs with too few chairs, and when the music
is playing much too fast. As Chuck Prince famously said in the Global Financial Crisis:
"As long as the music is playing, you've got to get up and dance." Whether or not
dancing is destructive, elites have to keep dancing to keep their chair.
I also hate wars, but I am reminded of Mancur Olson's theory that nations
recovering from a major disaster or a major military defeat usually have
above-average growth for a few decades. The idea is that when, as with the South in
the U.S. after the Civil War or with Germany and Japan after WWII, the elite in
society have suffered a setback so severe that their hold on society is disrupted,
there will be a period during which they are less able to set government policy in
their favor rather than the collective welfare.
SDT would have a somewhat different explanation of this. I agree with you that
rapid growth would be another way to reduce the intra-elite competition; it seems
the most likely explanation for the "missing" peak in non-governmental violence in
the U.S. in the 1820's that Peter Turchin pointed out earlier.
Peter Turchin January 1, 2017 at 7:32 pm
Historically, rapid growth coupled with equitable redistribution of its
gains is typically associated with peaceful and internally stable periods. But
you need both (growth and equity).
This idea is kind of half-formed, but I'll put it out there. It seems to me that one of
the most important factors in intra-elite competition, is the degree of skill of the
frustrated aspirants. If there are lots of people who want to be elite but can't crack the
system to get in, that may not be a problem if those frustrated aspirants aren't
particularly good at organization, motivation, leadership, etc.
If, on the other hand, the frustrated aspirants are nearly as good at this sort of thing
as those actually in power, and especially if they are better at it than the incumbents
(who somehow through tradition or family connections or what-have-you remain on top), then
you have a much better chance of the frustrated aspirants being able to kick up
trouble.
Of course, part of being good at leadership is getting the opportunity to practice, and
a post-secondary education almost always includes some practice at a more professional set
of social skills. But if the people getting spots in power remain better at political
organization than the people who don't, it is less likely to result in disruption, I think.
It seems that trouble would come when the ruling elite is either not especially good at
leading (e.g. they inherited their position or bought their way in with somebody else's
money), or they were good at leading in a previous time, and changes in society or
technology have changed what skills are necessary for leadership.
In all these cases, I think "good at leadership" would be a relative term, which is to
say the current elite relative to the frustrated aspirants. How you could measure such
skill, of course, is the key question about which I have as of yet nothing to say (I did
say the idea was half-formed).
steven t johnson January 1, 2017 at 8:10 am
Although intra-elite competition and inter-elite competition are conceptually distinct, is
that true in practice? Is Carlos Slim an intraelite competitor with Jeff Bezos, in the form
of rivalry between the New York Times and the Washington Post? If this is interelite
competition, how does structural-demographic theory address the issues of how external
factors impinge on the cycle? (I'm a little shaky on how interior and exterior are defined
in the first place. As for example, was there a cycle for Burgundy?)
Peter Turchin January 1, 2017 at 7:34 pm
Unlike "intra-elite competition", "inter-elite competition" is not a concept in SDT
(and like you I would be hard put to think what it could refer to).
edwardturner January 1, 2017 at 12:34 pm
The supply of power positions in a society is relatively, or even absolutely, inelastic. For example, there are only
435 U.S. Representatives, 100 Senators, and one President.
This is not quite true. The supply of power positions can be elastic to a point.
How about the growth in number of CEOs and NGOs and the heads of INGOs over the last 50
years? So-called non-state actors have become powerful as they influence the law-making
processes in a variety of ways.
These big chiefs are positions of power and influence. In many cases, they call the
shots and Presidents and Prime Ministers are only the PR guys.
The US President is not the most powerful person in the world. He doesn't have the
highest security clearance in the United States. He is not allowed to know everything.
The idea the US President is the most powerful man is a claim based on a theory of how
the US political system works in idealised sense, and on simple US nationalism.
The fact that the supply of power positions is elastic – that there has been a
flouresence of alternative power structures to the state hierarchy – suggests that
wealth can to a degree put off or delay elite competition.
It is only when the rug is pulled from under the alternative prestigious hierarchies and
the state tries to dominate all on its own – that is when problems will begin. Keep
the funding going, maintain non-state avenues for prestige and create even more, the
fluoresence will continue.
edwardturner January 1, 2017 at 12:36 pm
interested readers might like to read my report for Cliodynamics: Why Has the Number
of International Non-Governmental Organizations Exploded since 1960?
A point made in arthashastra, that fight among princes is more dangerous than fight
among commoners. However, I wud like to ask what predictions are u unable to do. There is
no real knowledge which doesnt admit what its limitations are, or admits inability to
explain something. Even in physics, where humans have gained incredible knowledge, there is
much to know. Also, on issue of religion, could one argue that but for christianity &
islam world wud have devekped faster as information in math/science wud have gathered pace,
exchanged between different lands easily.Thank you.
Peter Turchin January 1, 2017 at 7:43 pm
Interesting that Arthashastra foresees a major message of the SDT.
On the role of religion there are a lot of recent books from the cultural evolutionary
perspective, including David Wilson, Ara Norenzayan, and Dominic Johnson (I might also
mention my own Ultrasociety).
Dick Burkhart January 1, 2017 at 11:16 pm
Even direct democracy is not a cure-all. Here in Washington State, our initiative
and referendum process has been corrupted at times by big money interests: First put
together a sophisticated campaign around some catch phrases that will have popular
support on a topic where the opposition, even if widespread, is likely to be diffuse.
Then sneak in some coded language that privileges a wealthy special interest. Then use
paid signature gatherers. Then assemble a massive advertising campaign, one that will
outspend the likely opposition, maybe even by 10 to 1.
Certain people get very good at this and quickly learn to sell their services to the
highest bidder. The current master of such campaign here is a guy named Tim Eyman, and
he has been quite successful. But some companies, like Costco, have done the same thing
all by themselves.
Moral: You need to get "money out of politics" in all ways, and it's a never ending
battle until you've eliminated concentrated wealth and power itself.
Peter Turchin January 2, 2017 at 10:01 pm
Stephen Morris: you will find my response in an old post:
Prof Turchin, is there any data on the Supply of Elite Positions in Historic
Societies?
It doesn't feel instinctively right that it's inelastic, but perhaps there's really the
case. It feels slightly more likely to be right to say that it's capped somehow (inelastic
as to upside, more elastic as to downside).
But it seems like the sort of thing you should be able to answer with a History
Database. Has there been any attempts to measure this?
Peter Turchin January 2, 2017 at 10:06 pm
In fact, your are in luck, because we provide such statistics for a number of
historical societies in Secular Cycles http://peterturchin.com/secular-cycles/
Note, I didn't say it was inelastic. In most cases, it's relatively inelastic, so
that the growth in the number of aspirants greatly overmatches the growth in the supply
of the positions. Only in few instances the supply is absolutely inelastic (only one
POTUS).
Deficiencies in the concept of elite competition
Let's start with the definition of elite: "small proportion of the population that
concentrates power in their hands"
His theory lacks an aspect that must be fundamental before even proceeding in a discussion
on the "dynamics" of the elites and is that it is not able to explain in a satisfactory way
the origin of the so-called "elites". According to its definition it seems that the elites
are rather the manifestation of a particular phenomenon that is "concentration of power"; A
phenomenon that manifests itself socially in the form of the so-called "elite", which
hereafter I call the ruling class (I think it is a terminology in which we can all
agree).
But if we assume that the dominant classes are only a manifestation of the phenomenon of
the concentration of power, our attention must first be fixed in that aspect so we try to
break it down into its fundamental parts
. Apparently the concept of power gives to understand the concept of dominion (some will
have other words in mind but as surely they closely resemble the concept of domain I think
that it suffices to refer us to this one) and we do not refer to any type of domain but to
a domain Of social nature, a social domain. We will now say that this social domain
manifests itself in the form of economic and political dominion, I think we will agree on
this point.
Now let us collect the fruits of these arguments. We have a different and more precise
definition, which in no way invalidates the original, and we say: The ruling class is that
small proportion of the population that concentrates economic and political dominion in
their hands. I believe that we will agree that economic dominance is nothing but greater
possession of capital and that political dominance is but a major influence on a state
structure (the word "state" is used in a modern sense).
Now we have: the ruling class is that small proportion of the population that concentrates
the greatest possession of capital and the greatest influence within a state structure in
their hands. The last part of " in your hands" is understood by what we can eliminate it
and we have the following:
The ruling class is that small proportion of the population that concentrates the greatest
possession of capital and the greatest influence on a state structure.
Now the possession of capital depends on its production or of the association with someone
who produces capital. And it is revealed to us that the ruling class, apart from having
influence in a state structure, needs to produce capital or be associated with someone who
produces capital directly or indirectly.
Thanks to this we see clearly that competition between elites is a competition for economic
benefits and influence. Obviously the economic aspect is more significant than the aspect
of influence. It follows that a fall in economic profits, ie a fall in capital production
(a crisis), would directly or indirectly exacerbate the competition for greater economic
benefits, that is, increase the number of aspirants to elitist . The competition of elites
is not the cause of the crisis is one of the consequences of the crisis.
I must make a small correction in my analysis. By capital I wanted to let you
understand profit, so the use of that term in this argument is actually inappropriate
because I wanted to use the word capital in a Marxist sense.
Federico January 8, 2017 at 5:23 pm
Hello Dr Turchin, I was wondering if you are familiar with Richard Lachmann's "elite
conflict theory". It is a verbal theory, but one that he has successfully used to explain
fiscal crises, hegemonic cycles, and the rise of modern capitalist economies. What do you
think about it?
Best,
Federico
Shaun Bartone February 27, 2017 at 3:47 pm
I wonder if any of the commentators here have considered that the [neoliberal] cabal now in power in
the US (not elsewhere) are not in power to "take power" except for a temporary period. They
don't want to run the federal government, they want to destroy it, except for the police
state and the military.
They want to eliminate the EPA, vacate the State Dept and many
other Depts, except for a few high-placed cronies, wipe all financial, labour, consumer and
environmental regulations off the books; eliminate or reduce to a bare minimum federal
health insurance, medicaid, medicare and Social Security, crush public education, privatize
everything they can sell, and so on. They are not in power to "govern" but to destroy
government. This is all being done with a fairly unified agenda: to free "the market" from
any restrictions whatsoever, so that they -- global elites -- can make as much money as
possible. It's a cabal of global corporations, militarists, Christian sovereign white
supremacists, fossil fuel giants and bankers, and I think there's a high degree of
cooperation for the agenda. The revolution is the cabal run by Trump/Bannon who are more
extreme and ideological than any previous faction, who have no tolerance for compromise.
They have an apocalyptic vision of grinding it all down to a bare minimum police state.
The latest data compiled by the International
Labour Organization (ILO) sheds new light on COVID-19's "devastating" impact on the labor
market reveals a "massive" drop in labor income and hours for workers worldwide.
Global labor income plunged 10.7%, or $3.5 trillion, in the first nine months of 2020,
compared with the same period in 2019, ILO's new report found, which is one of the first
measurements to quantify the deep economic scarring that has left the global economy paralyzed.
The figure excludes income derived by governments to compensate for labor loss during the
pandemic.
The report, titled " ILO
Monitor: COVID-19 and the world of work. Sixth edition," was published on Wednesday (Sept.
23), notes how global labor hour losses in the first nine months of 2020 have been
"considerably larger" than the estimate from the previous report issued in late June.
The report found the largest income loss was primarily in lower-middle income countries,
where the labor income losses reached 15.1%.
"Workplace closures continue to disrupt labor markets around the world, leading to
working-hour losses that are higher than previously estimated," ILO said.
The United Nations agency said global working-hour losses are expected to remain elevated in
3Q20, at 12.1%, or equivalent to 345 million full-time equivalent (FTE) jobs (based on a
48-hour working week). The revised downside projections for 4Q20 suggest a more pessimistic
outlook for the global economy is ahead .
ILO's baseline scenario, for working-hour losses, in the fourth quarter, is -8.6%. The most
optimistic is +5.7%, while the most pessimistic is -18%.
"The latest data confirm that working-hour losses are reflected in higher levels of
unemployment and inactivity, with inactivity increasing to a greater extent than unemployment.
Rising inactivity is a notable feature of the current job crisis calling for strong policy
attention. The decline in employment numbers has generally been greater for women than for
men," ILO said.
The driver behind increased working-hour losses in developing and emerging economies is that
informal employment continues to be affected by strict public health orders to mitigate the
virus spread.
ILO said there's a "clear correlation" between how much fiscal stimulus a country does and
working-hour losses. For example, more stimulus has offset a reduction in working hours. Many
of these stimulus packages have been observed in high-income countries, as emerging and
developing economies had limited borrowing capacity to finance such measures.
ILO Director-General Guy Ryder warned about a "huge fiscal stimulus gap," and the dire need
for governments to unleash more fiscal stimulus to mitigate additional stresses in the global
labor market.
"Just as we need to redouble our efforts to beat the virus, so we need to act urgently and
at scale to overcome its economic, social, and employment impacts. That includes sustaining
support for jobs, businesses, and incomes," Ryder said in a statement.
A record of 25% of all
personal income in the US is derived from the government via stimulus programs. Without
stimulus, the economy craters.
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With ILO's report noting more labor market stress is ahead for the final quarter of the
year, it all suggests there will be no "V"- shaped recovery in 2H20.
And this could be the moment where Wall Street realizes the shape of the recovery was never
a "V," resulting
in the next wave down in stocks.
Why does neoclassical economics produce ponzi schemes of inflated asset prices?
It makes you think you are creating wealth by inflating asset prices
Bank credit flows into inflating asset prices, debt rises faster than GDP and you
eventually get a financial crisis.
No one notices the private debt building up in the economy as neoclassical economics
doesn't consider debt.
This economics still has its 1920s problems. What is the fundamental flaw in the free
market theory of neoclassical economics? The University of Chicago worked that out in the
1930s after last time. Banks can inflate asset prices with the money they create from bank
loans.
Henry Simons and Irving Fisher supported the Chicago Plan to take away the bankers ability
to create money.
"Simons envisioned banks that would have a choice of two types of holdings: long-term
bonds and cash. Simultaneously, they would hold increased reserves, up to 100%. Simons saw
this as beneficial in that its ultimate consequences would be the prevention of
"bank-financed inflation of securities and real estate" through the leveraged creation of
secondary forms of money."
It looks like they did have some idea what the problem was.At the end of the 1920s, the US
was a ponzi scheme of inflated asset prices. The use of neoclassical economics and the belief
in free markets, made them think that inflated asset prices represented real wealth
accumulation.
1929 – Wakey, wakey time. Why did it cause the US financial system to collapse in
1929? Bankers get to create money out of nothing, through bank loans, and get to charge
interest on it.
Bankers do need to ensure the vast majority of that money gets paid back, and this is
where they get into serious trouble.
Banking requires prudent lending.
If someone can't repay a loan, they need to repossess that asset and sell it to recoup
that money. If they use bank loans to inflate asset prices they get into a world of trouble
when those asset prices collapse.
As the real estate and stock market collapsed the banks became insolvent as their assets
didn't cover their liabilities.
They could no longer repossess and sell those assets to cover the outstanding loans and
they do need to get most of the money they lend out back again to balance their books.
The banks become insolvent and collapsed, along with the US economy.
When banks have been lending to inflate asset prices the financial system is in a
precarious state and can easily collapse.
What was the ponzi scheme of inflated asset prices that collapsed in Japan in 1991?
Japanese real estate.
They avoided a Great Depression by saving the banks.
They killed growth for the next 30 years by leaving the debt in place.
What was the ponzi scheme of inflated asset prices that collapsed in 2008?
"It's nearly $14 trillion pyramid of super leveraged toxic assets was built on the back of
$1.4 trillion of US sub-prime loans, and dispersed throughout the world" All the Presidents
Bankers, Nomi Prins.
They avoided a Great Depression by saving the banks.
They left Western economies struggling by leaving the debt in place, just like Japan.
It's not as bad as Japan as we didn't let asset prices crash in the West, but it is this
problem has made our economies so sluggish since 2008.
In 2020, the world is a ponzi scheme of inflated asset prices.
The use of neoclassical economics and the belief in free markets, made them think that
inflated asset prices represented real wealth accumulation.
The central banks have to keep pumping in liquidity to stop all the ponzi schemes
collapsing.
If the ponzi schemes collapse, this feeds back into the financial system when bankers have
been lending to inflate asset prices.
play_arrow
Sound of the Suburbs , 1 hour ago
Bankers make the most money when they are driving your economy towards a financial
crisis.
You don't want to leave them to their own devices.
On a BBC documentary, comparing 1929 to 2008, it said the last time US bankers made as
much money as they did before 2008 was in the 1920s.
Bankers make the most money when they are driving your economy into a financial
crisis.
The financial crisis appears to come out of a clear blue sky when you use an economics
that doesn't consider debt.
The economics of globalisation has always had an Achilles' heel.
The 1920s roared with debt based consumption and speculation until it all tipped over into
the debt deflation of the Great Depression. No one realised the problems that were building
up in the economy as they used an economics that doesn't look at debt, neoclassical
economics.
Not considering private debt is the Achilles' heel of neoclassical economics.
Sound of the Suburbs , 1 hour ago
Come on.
Wakey, wakey.
You are just repeating 1920s mistakes.
The Americans wrapped a new ideology, neoliberalism, around 1920s economics and repeated
the economic mistakes of the 1920s.
Policymakers couldn't see what Glass-Steagall did, as they thought banks were financial
intermediaries.
It separates the money creation side of banking from the investment side of banking, and
stops bankers producing securities; they buy themselves with money they create out of
nothing.
"By early 1929, loans from these non-banking sources were approximately equal to those
from the banks. Later they became much greater. The Federal Reserve Authorities took it for
granted that they had no influence over these funds"
He's talking about "shadow banking".
They thought leverage was great before 1929; they saw what happened when it worked in
reverse after 1929.
Leverage acts like a multiplier.
It multiplies profits on the way up.
It multiplies losses on the way down.
Today's bankers seem to have learnt something from past mistakes.
They took the multiplied profits on the way up.
Taxpayers picked up the multiplied losses on the way down.
Mariner Eccles, FED chair 1934 -- 48, observed what the capital accumulation of
neoclassical economics did to the US economy in the 1920s.
"a giant suction pump had by 1929 to 1930 drawn into a few hands an increasing proportion
of currently produced wealth. This served then as capital accumulations. But by taking
purchasing power out of the hands of mass consumers, the savers denied themselves the kind of
effective demand for their products which would justify reinvestment of the capital
accumulation in new plants. In consequence as in a poker game where the chips were
concentrated in fewer and fewer hands, the other fellows could stay in the game only by
borrowing. When the credit ran out, the game stopped"
The problem; wealth concentrates until the system collapses.
"The other fellows could stay in the game only by borrowing." Mariner Eccles, FED chair
1934 -- 48
Your wages aren't high enough, have a Payday loan.
You need a house, have a sub-prime mortgage.
You need a car, have a sub-prime auto loan.
You need a good education, have a student loan.
Still not getting by?
Load up on credit cards.
"When the credit ran out, the game stopped" Mariner Eccles, FED chair 1934 -- 48
...... etc .....
x_Maurizio , 1 hour ago
DISAGREE ON EVERY SINGLE WORD, in particular with this:
rules/regulations/capital requirements have infected the global banking system and
rendered it a harvesting operation for retail and a derivatives rule/regulation/capital
requirment evasion device for the pursuit of profit
absolutely false.
Banking system is in the 4th part of a cycle that they have created !
The first part has been capital harvesting (1970-1980)
The second part has been deregulation and hunt for stellar return on investment
The third part is financialisation and plunder of real economy
The fourth part is the destruction of real economy through debt, deflation, extreme
financial activity seeking for Yields. The banks have been the fortresses of globalisation.
Commercial banking has been absorbed by investment banking. In this deflationary
environment Commercial Banking has practice NO ROI.
You want to see the Banks working again? Reintroduce the Glass Steagall and separate again
investment and commercial banking. Repeal all what has been done between 1987 and 1999. THAT
will stop globalisation, that will stop the slow bleeding-to-death of westerne economies,
that will save commercial banking and our capitalistic societies.
For eight-and-a-half decades, most Republican legislators (and some Democrats) have been
trying to get rid of Social Security .
The first step in Trump's assault on Social Security's funding took effect Sept. 1st.
On Trump's orders, the IRS ordered corporations to stop withholding Social Security
contributions from paychecks, through the end of the year.
Speaking on Fox Business recently, Trump advisor Larry Kudlow said that later this year
Trump will order the IRS to continue the deferral indefinitely.
Social Security's chief actuary wrote that if Social Security is defunded, some benefits
will be reduced next year, and that benefits will disappear entirely by the end of 2023.
If you are, or if you know someone on Social Security, please pass the word!
International Man : Thanks to the shutdowns, economic activity on main street is at a
standstill. Government, corporate, and personal debt is skyrocketing. Yet, the stock market is
in a mania. Has the stock market become out of touch with reality, and if so, what are the
consequences of that?
David Stockman : Both ends of the Acela Corridor have lost their marbles. This year, Uncle
Sam borrowed $4 trillion in six months, the Fed printed $3 trillion in three months, and Wall
Street drove the S&P 500 to 52X reported LTM earnings in the context of a deeper economic
plunge than occurred in the worst quarter of the 1930s.
Therefore, Washington has become disconnected from any semblance of fidelity to sound money
and fiscal rectitude, while Wall Street has turned into an outright casino, valuing stocks
based on endless Fed liquidity injections and the delusion that momentum chasing is an
investment strategy.
With respect to the rampant folly in the Imperial City, Treasury Secretary Stevie Mnuchin
has always reminded us of Alfred E. Neuman of "Me Worry?" fame at Mad Magazine. Recently, he
more than earned that moniker when, in the context of the current monetary and fiscal lunacy,
he proclaimed that, "Now is not the time to worry about shrinking the deficit or shrinking the
Fed balance sheet."
That was the so-called Conservative Party speaking, and it is a shrill reminder that the
Trumpified GOP has gone utterly AWOL when it comes to its true job in American democracy,
namely, resisting the Government Party (Dems) and its affinity for feeding the Leviathan on the
Potomac.
That is to say, according to even the Keynesian deficit apologists at the CBO, Uncle Sam
will spend $6.6 trillion during the current fiscal year (FY 2020) while collecting only $3.3
trillion in revenue. That's Banana Republic stuff -- borrowing 50% of every dollar spent.
Yet the advisory ranks of the potentially incoming Kamala Harris regency are even worse.
They are loaded with "deficits don't matter" ideologues and MMT crackpots who noisily argue
that massive monetization of the public debt is not just a virtue, but utterly imperative.
Needless to say, this bipartisan commitment to all-in stimulus is financial catnip to the
Wall Street gamblers because they are actually capitalizing into today's nosebleed stock
prices, not the present drastically impaired economy on Main Street but a pro forma simulacrum
of future prosperity based on the delusional presumption that massive debt and money-pumping
actually create economic growth and wealth.
The fact is, industrial production in August posted at a level first achieved in March 2006,
and manufacturing output weighed in at levels originally attained in December 2004. So the
misbegotten lockdowns and COVID-hysteria have cost the US economy 14–16 years of
industrial production growth, yet this massive setback was not caused by some mysterious
Keynesian-style faltering of "demand" that can allegedly be compensated for by new Fed credits
plucked from thin air.
To the contrary, the current depression is the result of the visible shutdown and quarantine
orders of the state, which are likely to linger for months to come or even intensify as the
fall-winter flu season arrives. Undoubtedly, the Virus Patrol will spur further outbreaks of
public fear based on "bad numbers" from the CDC, which are actually an agglomeration of cases
and deaths from normal influenza, pneumonia, and a myriad of life-threatening comorbidities,
not pure cases of the COVID alone.
But beguiled by "stimulus" and hopium, Wall Street completely ignores the contradiction
between over-the-top demand stimulus and what amounts to supply-side contraction owing to
economic martial law.
So, at 3400 on the S&P 500, the current LTM price-to-earnings ratio ranges between 52.1
times the earnings CEOs and CFOs certify on penalty of jail time ($65 per share) or 27 times
the Wall Street brush-stroked and curated version ($125 per share), from which all asset
write-offs, restructuring charges, and other one-timers/mistakes have been finessed out.
Of course, these deleted GAAP charges reflect the consumption of real corporate resources,
such as purchase price goodwill that gets written off when a merger or acquisition goes sour,
or the write-down of investments in factories, warehouses, and stores that get closed. As such,
they absolutely do diminish company resources and shareholder net worth over time.
But for decades now, Wall Street has so relentlessly and assiduously ripped anything that
smells like a "one-timer" out of company earnings filings with the Securities and Exchange
Commission (SEC) that it no longer even knows what GAAP earnings actually are.
And it pretends that these discarded debits (and credits) to income are simply lumpy things
that even out in the wash over time. They do not.
If ex-items reporting was merely a neutral smoothing mechanism, reported GAAP earnings and
"operating earnings" would be equal when aggregated over several years, or even a full business
cycle.
Yet during the last 100 quarters, there have been essentially zero instances in which
reported GAAP earnings exceeded "operating income."
So, in aggregate terms, several trillions of corporate write-downs and losses have been
swept under the rug.
During the second quarter of 2020, for example, GAAP earnings reported to the SEC totaled
$145.8 billion for the S&P 500 companies, while the ex-items earnings curated by the street
posted at $222.3 billion. That amounts to the deletion of nearly $77 billion of write-downs and
mistakes, and it inflated the aggregate earnings number by more than 52%.
The game is all about goosing the earnings number in order to minimize the apparent
price-to-earnings multiple, thereby supporting the fiction that stocks are reasonably valued
and that nary a bubble is to be found, at least in the broad market represented by the S&P
500.
Still, valuing the market at 52 times trailing-12-month earnings during the present parlous
moment in time -- or even 27 times if you want to give the financial engineering jockeys in the
C-suites a hall-pass for $77 billion of mistakes and losses this quarter alone -- is nothing
short of nuts.
Yet, the gamblers in the casino hardly know it.
Wall Street has already decided that current-year results don't matter a whit: the
nosebleed-level trailing P/E multiples currently being racked up are simply being shoved into
the memory hole on the presumption that the sell side's evergreen hockey sticks will come true
about four quarters into the future, and if they don't, a heavy dose of ex-items bark-stripping
will gussy up actual earnings when they come in.
Still, if you think that a forward P/E multiple of, say, 17.5 times is just fine and that
flushing the one-timers is OK, then you still need $193 per share of operating earnings by the
second quarter of 2021 to justify today's index level.
Then again, a 54% gain in operating earnings over the next four quarters ($193 per share in
the second quarter of 2021 versus $125 per share in the second quarter of 2020) is not simply a
tall order; it's downright delusional.
International Man : What could derail the Fed's ability to pump up the stock market casino
with all this easy money? They simultaneously want zero interest rates and more inflation. It
seems something has to give.
David Stockman : Yes, what's going to "give" sooner or later is the entire house of monetary
cards erected by the Fed and its fellow-traveling global central banks over the last several
decades. What they are doing is based on the triple error that inflation is too low, that
deeply repressed and falsified interest rates fuel real growth, and that private savers are a
hindrance to optimal economic function and need to be euthanized via confiscation of the real
(after-inflation) value of their capital.
In the first place, as Paul Volcker pointedly reminded, there is nothing in the pre-1990
textbooks that says 2.00% inflation is desirable and is to be pursued with fanatical intensity
-- even if actual inflation comes in only a few basis points below the magic target.
Indeed, if the 2% target is zealously pursued via prolonged pegging of interest rates to the
zero bound and the massive purchase of bonds and other securities, the result is actually
inimical to economic growth and sustainable gains in real wealth.
That's because falsified interest rates and inflated financial asset values lead to massive
malinvestment via rampant financial engineering in the corporate sector and reckless borrowing
to fund transfer payments and economic waste in the public sector.
Nor is that a mere theoretical possibility. The rolling 10-year real GDP growth rate has now
fallen to just 1.5% per annum, or barely one-third of the 3–4% per year rolling averages
which prevailed during the heyday of reasonably sound money and fiscal rectitude prior to
1971.
Beyond that, there really hasn't been any inflation shortfall from the 2% target, unless
measured by the Fed's flakey yardstick called the PCE deflator. For instance, since December
1996, when Greenspan uttered his irrational exuberance warning, the CPI is up by 2.09% per
annum and the more stable 16% trimmed-mean CPI is up by 2.12% per annum.
That hardly constitutes a "shortfall" from target, but the Eccles Building money-printers
make the claim anyway because the PCE deflator gained slightly less over that 23 year period,
averaging an increase of 1.71 per annum.
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The truth is, no one except groupthink besotted central bankers would think that a mere 30
basis point shortfall over more than two decades justifies the massive financial fraud of
pumping trillions of fiat credit into the financial system.
That's especially the case because the PCE deflator drastically underweights shelter costs
and doesn't even measure the purchasing power of money against a fixed basket of goods and
services over time, anyway. Instead, it is actually a tool of GDP accounting that reflects the
changing mix of goods and services supplied to the household sector.
That is to say, if someone chooses to live in a tepee and spend nearly all of their paycheck
on computers, TVs, and other high-tech gadgets that have been rapidly falling in price, that
doesn't improve the exchange value of the dollar wages they earn; it just means that their
tepee may be getting crowded with tech gadgets.
The same is true of the aggregate level. Just because the mix of goods and services changes
over time, that doesn't miraculously rescue the purchasing power of the dollar
from the ravages of inflation .
Nor does it alleviate the savaging of lower- and middle-class living standards that are the
direct product of the Fed's misguided commitment to inflation targeting. In fact, during that
same 23-year period, the annual rate of increase for professional services, shelter, food away
from home, medical services, and education expense has been 2.6%, 2.7%, 2.8%, 3.5%, and 4.5%,
respectively.
So once you set aside the foolishness of 2% inflation targeting and the Fed's sawed-off
inflation measuring stick (the PCE deflator), what you really have is growth stunting monetary
madness. There is no other way to explain a Fed balance sheet that went from $4.2 trillion on
March 4 this year to $7.2 trillion by June 10.
After all, the first $3 trillion of Fed balance sheet took nearly 100 years to generate,
from its opening in 1914 to breaching the $3 trillion marker for the first time in March 2013.
That the Fed has now become a monetary doomsday machine, therefore, is no longer in doubt.
* * *
The truth is, we're on the cusp of a economic crisis that could eclipse anything we've seen
before. And most people won't be prepared for what's coming. That's exactly why bestselling
author Doug Casey and his team
just released a free report with all the details on how to survive an economic collapse.
Click here to download the PDF now.
I have previously discussed the importance of understanding how "physics" plays a crucial
role in the stock market. As Sir Issac Newton once discovered, "what goes up, must come
down."
Andy Kessler, via the Wall Street
Journa l, recently discussed a similar point with respect to the momentum in stock prices.
To wit:
"Does this sound familiar: Smart guy owns stock in March at $200, sells it in June at
around $600, but then buys it back in July and August for between $900 and $1,000. By
September it's back at $200. Ouch. Tesla this year? Yahoo in 2000? Nope. That was Sir Isaac
Newton getting pulled into the great momentum trade of the South Sea Co., which cratered 300
years ago this month. He lost the equivalent of more than $3 million today. Newton, whose
second law of motion is about the momentum of a body equaling the force acting on it, didn't
know that works for stocks too."
To understand what happened to the South Sea Corporation, you need a bit of
history.
The South Sea History
In 1720, in return for a loan of £7 million to finance the war against France, the
House of Lords passed the South Sea Bill, which allowed the South Sea Company a monopoly in
trade with South America.
England was already a financial disaster and was struggling to finance its war with France.
As debts mounted, England needed a solution to stay afloat. The scheme was that in exchange for
exclusive trading rights, the South Sea Company would underwrite the English National Debt. At
that time, the debt stood at £30 million and carried a 5% interest coupon from the
Government. The South Sea company converted the Government debt into
its own shares. They would collect the interest from the Government and then pass it on to
their shareholders.
Interesting Absurdities
At the time, England was in the midst of rampant market speculation. As soon as the South
Sea Company concluded its deal with Parliament, the shares surged to more than 10 times their
value. As South Sea Company shares bubbled up to incredible new heights, numerous other
joint-stock companies IPO'd to take advantage of the booming investor demand for speculative
investments.
Many of these new companies made outrageous, and often fraudulent, claims about their
business ventures for the purpose of raising capital and boosting share prices. Here are some
examples of these companies' business proposals (History House, 1997):
Supplying the town of Deal with fresh water.
Trading in hair.
Assuring of seamen's wages.
Importing pitch and tar, and other naval stores, from North Britain and America.
Insuring of horses.
Improving the art of making soap.
Improving gardens.
The insuring and increasing children's fortunes.
A wheel for perpetual motion.
Importing walnut-trees from Virginia.
The making of rape-oil.
Paying pensions to widows and others, at a small discount.
Making iron with pit coal.
Transmutation of quicksilver into a malleable fine metal.
For carrying on an undertaking of great advantage; but nobody to know what it is.
A Speculative Mania
However, in the midst of the "mania," things like valuation, revenue, or even viable
business models didn't matter. It was the "Fear Of Missing Out," which sucked investors into
the fray without regard for the underlying risk.
Though South Sea Company shares were skyrocketing, the company's profitability was mediocre
at best, despite abundant promises of future growth by company directors.
The eventual selloff in Company shares was exacerbated by a previous plan of lending
investors money to buy its shares. This "margin loan," meant that many shareholders had to sell
their shares to cover the plan's first installment of payments.
As South Sea Company and other "bubble " company share prices imploded, speculators who had
purchased shares on credit went bankrupt. The popping of the South Sea Bubble then resulted in
a contagion that spread across Europe.
Newton's Folly
Sir Issac Newton, the brilliant mathematician, was an early investor in South Sea
Corporation. Newton quickly made a lot of money and recognized the early stages of a
speculative mania. Knowing that it would eventually end badly, he liquidated his stake at a
large profit.
However, after he exited, South Sea stock experienced one of the most legendary rises in
history. As the bubble kept inflating, Newton allowed his emotions to overtake his previous
logic and he jumped back into the shares. Unfortunately, it was near the peak.
It is noteworthy that once Newton decided to go back into South Sea stock, he moved
essentially all his financial assets into it. In general, Newton was intimately familiar with
commodities and finance. As Master of the Mint, his post required him to make many decisions
that depended on market prices and conditions.
The story of Newton's losses in the South Sea Bubble has become one of the most famous in
popular finance literature. While surveying his losses, Newton allegedly said that he could
"calculate the motions of the heavenly bodies, but not the madness of people."
Throughout financial history, markets have evolved from one speculative "bubble," to bust,
to the next with each one being believed "it was different this time."
The slides below are from a presentation I made to a large mutual fund company.
What we some common denominators between all previous bubbles and now.
The table below shows a listing of assets classes that have experienced bubbles throughout
history, with the ones related to the current environment highlighted in yellow.
It is not hard to see the similarities between today and the previous market bubbles in
history. Investors are currently chasing "new technology" stocks from Zoom to Tesla, piling
into speculative call options, and piling into leverage. What could possibly go wrong?
Oh, by the way, the slides above are from a 2008 presentation just one month before the
Lehman crisis.
The point here is that speculative cycles are always the same.
The Speculative
Cycle
Charles Kindleberger suggested that speculative manias typically commence with a
"displacement" which excites speculative interest. The displacement may come from either an
entirely new object of investment (IPO) or from increased profitability of established
investments.
The speculation is then reinforced by a "positive feedback" loop from rising prices. which
ultimately induces "inexperienced investors" to enter the market. As the positive feedback loop
continues, and the "euphoria" increases, retail investors then begin to "leverage" their risk
in the market as "rationality" weakens.
The full cycle is shown below.
During the course of the mania, speculation becomes more diffused and spreads to different
asset classes. New companies are floated to take advantage of the euphoria, and investors
leverage their gains using derivatives, stock loans, and leveraged instruments.
As the mania leads to complacency, fraud and manipulation enter the market place.
Eventually, the market crashes and speculators are wiped out. The Government and Regulators
react by passing new laws and legislations to ensure the previous events never happen
again.
The Latest Mania
Let's go back to Andy for a moment:
"When bull markets get going, investors come out of the woodwork to pile in. These
momentum investors -- I call them momos -- figure if a stock is going up, it will keep going
up. But usually, there is some source of hot air inflating stocks: either a structural
anomaly that fools investors into thinking ever-rising stock prices are real or a source of
capital that buys, buys, buys -- proverbial 'dumb money.' Think of it as a giant fireplace
bellows, an accordion-like contraption that pumps in fresh oxygen to keep flames growing."
– Andy Kessler
We have seen these manias repeated throughout history.
In 1929 you could buy stocks with as little as a 5% down payment
The 1960s and '70s had the Nifty Fifty bubble.
In 1987 it was a rising dollar, portfolio insurance, and major investments by the
Japanese into U.S. real estate.
In 2000, it was the new paradigm of the internet and the influx of new online trading
firms like E*Trade creating liquidity issues in Nasdaq stocks. Additionally, record numbers
of companies were being brought public by Wall Street to fill investor demand.
In 2008, subprime mortgages, low interest rates, and lax lending policies, combined with
a litany of derivative products inflated massive bubbles in debt instruments.
In 2020?
What about today? Look back at the chart of the South Sea Company above. Now, the one
below.
See any similarities.
Yes, that's Tesla
However, you can't solely blame the Federal Reserve as noted by Andy:
"Most simply blame the Federal Reserve -- especially today, with its zero-interest-rate
policy -- for pumping the hot air that gets the momos going. Fair enough, but that's only
part of the story. Long market runs have always allured investors who figure they're smart to
jump in, even if it's late.
Everyone forgets the adage, 'Don't mistake brains for a bull market.'"
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As stated, while no two financial manias are ever alike, the end results are always the
same.
Are there any similarities in today's market? You decide.
"From SPACs, or special purpose acquisition companies, which are modern-day blind pools
that often don't end well. Today's momos also chase stock splits, which mean nothing for a
company's actual value. Same for a new listing in indexes like the S&P 500. Isaac Newton
could explain the math." – Andy Kessler
You get the idea. But one of the tell-tale indications is the speculative chase of "zombie"
companies which are only still alive primarily due to the Federal Reserve's
interventions.
Fixing The Cause Of The Crash
Historically, all market crashes have been the result of things unrelated to valuation
levels. Issues such as liquidity, government actions, monetary policy mistakes, recessions, or
inflationary spikes are the culprits that trigger the "reversion in sentiment."
Importantly, the "bubbles" and "busts" are never the same.
I previously quoted Bob Bronson on this point:
"It can be most reasonably assumed that markets are efficient enough that every bubble is
significantly different than the previous one. A new bubble will always be different from the
previous one(s). Such is since investors will only bid prices to extreme overvaluation levels
if they are sure it is not repeating what led to the previous bubbles. Comparing the current
extreme overvaluation to the dotcom is intellectually silly.
I would argue that when comparisons to previous bubbles become most popular, it's a
reliable timing marker of the top in a current bubble. As an analogy, no matter how
thoroughly a fatal car crash is studied, there will still be other fatal car crashes. Such is
true even if we avoid all previous accident-causing mistakes."
Comparing the current market to any previous period in the market is rather pointless. The
current market is not like 1995, 1999, or 2007? Valuations, economics, drivers, etc. are all
different from cycle to the next.
Most importantly, however, the financial markets always adapt to the cause of the previous
"fatal crash."
Unfortunately, that adaptation won't prevent the next one.
Yes, this time is different.
"Like all bubbles, it ends when the money runs out." – Andy Kessler
Harvard and Yale are set to respond this week to a series of legal challenges accusing them
of racial bias against Asian and White applicants during the admissions process, according to
Bloomberg .
The universities will respond to two of those challenges to 'race-conscious admissions,'
while two more make their way through the legal system against other universities. The
controversy could make it all the way to the Supreme Court, which ruled over 40 years ago in
its Bakke decision that race is a valid factor in creating a diverse student body.
While the decision has been reaffirmed over the years, it's possible that the 'conservative'
majority Supreme Court will strike Bakke down .
"Sandra Day O'Connor basically opined that we could have another 20 years or 25 years of
affirmative action programs, but that they would not go on forever," said conservative Linda
Chavez, chairman of the Center for Equal Opportunity. " And yet we do see them going on forever
," she added.
O'Connor speculated in 2003 that the race-based consideration wouldn't go on 'forever.'
17-years later, it's still happening.
" We're now talking about kids who are getting into college on the basis of some racial or
ethnic preference who are the grandchildren of people who first got those preferences. "
The Justice Department has
threatened to sue Yale unless it agrees to stop considering race . " Unlawfully dividing
Americans into racial and ethnic blocs fosters stereotypes, bitterness, and division ," the
government wrote to the university in August. Yale, which has
vowed to "vigorously defend" a process "endorsed repeatedly by the Supreme Court," is due
to respond this week.
On Wednesday, Harvard goes before a federal appeals court
over a case that it engages in "racial balancing" by holding Asian-American applicants to a
higher standard than other minority groups. Harvard denies discriminating and won the case in
federal district court last fall. -
Bloomberg
The Harvard suit and two other pending lawsuitsagainst the University of North Carolin and
the University of Texas were brought by activist Edward Blum - a longtime foe of affirmative
action and founder of Students for Fair Admissions. The Justice Department filed in the Harvard
case in support of the group , claiming that the school's admissions process is " infected with
racial bias ."
Making a review by the Supreme Court even more likely is that there are now four challenges
in four states against both public and private universities, meaning that conflicting rulings
from different appeals courts would call for the higher court's opinion.
"That's what they want," said Audrey Anderson, former general counsel at Vanderbilt
University. "They want it to go to the Supreme Court because the justices who upheld
affirmative action are not on the court anymore."
Amid the flurry of court papers, a July study by the Education Trust , which advocates for
educational opportunities for disadvantaged students, found that African Americans and
Latinos continue to be underrepresented at 101 of the country's top public universities and
that their representation has even regressed in many instances over the past two decades.
"I know that there's folks who are against affirmative action, of all backgrounds," who
believe "that we are there, and it's not needed, and maybe there's even some
over-representation or over-emphasis on race that we need to correct for," said Tiffany Jones , senior director
of education policy at the Trust. That perception, she said, "is contradicted by the data and
the research and the information about who has access to higher education." -
Bloomberg
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Last year, US District Judge Allison Burroughs found that Harvard didn't set quotas or give
undue consideration to race when reviewing applicants, and instead weighed race as one of over
200 factors which includes socioeconomic background, areas of study and letters of
recommendation, according to the report.
Blum, on the other hand, says that the evidence in the Harvard case "compellingly proved
Harvard's systematic discrimination against Asian-American applicants," and that "We assert the
district court erred in its analysis of this evidence and, surprisingly, virtually ignored
Harvard's own internal studies" that he says showed bias.
High-yield bond default rates may double as companies struggle with a protracted economic
downturn even as the Federal Reserve props up valuations, said Jeffrey Gundlach.
The investment grade corporate debt market has skewed toward lower quality BBB- rated debt,
but if just 50% of that were to be downgraded it could fuel a near doubling of the high-yield
market, Gundlach said Tuesday on a webcast for his firm's flagship DoubleLine Total Return Bond Fund .
Gundlach's views reflect broad skepticism about the market's connection to economic
realities. He criticized the Fed's emergency actions as buoying asset prices and spurring
unsustainable corporate borrowing binges.
Risk assets such as equities and high yield credit markets are responding to this support,
and government stimulus, disproportionately as the Covid-19 pandemic remains a threat to the
recovery, he said.
"It's foolhardy to believe that one can have this kind of a shock to an economy and it just
gets healed through a one-shot deal" from the Treasury, he said.
Gundlach pointed out that the global GDP forecast is -3.9%, whereas the U.S. lags at -5%
despite the country's response to the Covid-19 crisis being "one of the highest in the
world."
Highlighting the effect of the weekly $600 stimulus checks, he called it a distortion of the
personal-income spending picture akin to the Fed's effect on the markets.
"This is a large incentive to stay on public assistance," Gundlach said, noting that benefit
payments have exceeded many workers' regular income.
Gundlach also snubbed one of the market's favorite trades on a U.S. recovery, saying he's
"betting against" the inflation-linked bond market. TIPS products have seen some of the
strongest monthly inflows in four years, and market-implied expectations for inflation have
touched a 2020 high. Gundlach repeated that the impact of the pandemic is deflationary.
In the days, weeks, and months immediately following the 9/11 attacks, Arab-Americans,
South Asian-Americans, Muslim-Americans, and Sikh-Americans were the targets of widespread
hate violence. Many of the perpetrators of these acts of hate violence claimed they were
acting patriotically by retaliating against those responsible for 9/11.
...
Just after September 11, numerous Arabs, Muslims, and individuals perceived to be Arab or
Muslim were assaulted, and some killed, by individuals who believed they were responsible
for or connected to the attacks on the World Trade Center and Pentagon. The first backlash
killing occurred four days after September 11.
Balbir Singh Sodhi was shot to death on September 15 as he was planting flowers outside
his Chevron gas station. The man who shot Sodhi, Frank Roque, had told an employee of an
Applebee's restaurant that he was "going to go out and shoot some towel heads." Roque
mistakenly thought Sodhi was Arab because Sodhi, an immigrant from India, had a beard and
wore a turban as part of his Sikh faith. After shooting Sodhi, Roque drove to a Mobil gas
station a few miles away and shot at a Lebanese-American clerk. He then drove to a home he
once owned and shot and almost hit an Afghani man who was coming out the front door. When
he was arrested two hours later, Roque shouted, "I stand for America all the way."
The next two killings were committed by a man named Mark Stroman. On September 15, 2001,
Stroman shot and killed Waquar Hassan, an immigrant from Pakistan, at Hassan's grocery
store in Dallas, Texas. On October 4, 2001, Stroman shot and killed Vasudev Patel, an
immigrant from India and a naturalized U.S. citizen, while Patel was working at his Shell
station convenience store. A store video camera recorded the killing, helping police to
identify Stroman as the killer. Stroman later told a Dallas television station that he shot
Hassan and Patel because, "We're at war. I did what I had to do. I did it to retaliate
against those who retaliated against us."
Beyond these killings, there were more than a thousand other anti-Muslim or anti-Arab
acts of hate which took the form of physical assaults, verbal harassment and intimidation,
arson, attacks on mosques, vandalism, and other property damage.
Instead of "calming prejudice" the GB Bush administration institutionalized hate
crimes:
First, in the weeks immediately following the September 11 attacks, the government began
secretly arresting and detaining Arab, Muslim, and South Asian men. Within the first two
months after the attacks, the government had detained at least 1,200 men.
...
Second, in November 2001, the Department of Justice began efforts to "interview"
approximately 5,000 men between the ages of 18 and 33 from Middle Eastern or Muslim nations
who had arrived in the United States within the previous two years on a temporary student,
tourist, or business visa and were lawful residents of the United States. Four months
later, the government announced it would seek to interview an additional 3,000 men from
countries with an Al Qaeda presence.
...
Third, in September 2002, the government implemented a "Special Registration" program also
known as NSEERS (National Security Entry-Exit Registration System), requiring immigrant men
from 26 mostly Muslim countries to register their name, address, telephone number, place of
birth, date of arrival in the United States, height, weight, hair and eye color, financial
information and the addresses, birth dates and phone numbers of parents and any foreign
friends with the government.
Besides all that a rather useless security theater was installed at U.S. airports which
has costs many billions in lost time and productivity ever since. The Patriot Act was
introduced which allowed for unlimited spying on private citizens. Wars were launched that
were claimed to be justified by 9/11. These were "mass outbreaks of anti-Muslim sentiment and
violence. Many were killed and maimed in them. People were tortured and vanished. All of this
happened largely to applause of a majority of the U.S. people which were glued to 24 and dreamed of being "terrorist
hunters".
Anyone with a functional memory knows that the U.S. reaction to 9/11 was anything but
"pretty calm". It is ridiculous that Krugman is claiming that.
I find it a bit humorous b that you are critical of Krugman for his 911 dementia when for
years many of us finance types have railed about how morally corrupt the logic and thinking
of Paul Krugman is.
Paul Krugman is to economics what Bernie Sanders has become for the purported "left" side
of the "right wing" uni-party....a sheep dog for the easily led.
Paul Krugman is an acolyte for the God of Mammon/global private finance elite.
While spreading anger and hate toward Arab people, The Bush Administration rescued the
many members of the Kingdom's family from all around the US and escorted their flights out of
the US to safety in Saudi Arabia.
Distracting the public big time was Dick Cheney, VP, who insisted from the very next day
that the plot to hit the Twin Towers was Saddam's plot.
So, the historical record and US response was skewed from the getgo. AQ and Bin Laden
didn't concern the neocons. They wanted the US to go to Iraq again, and this time start a
wide war that would spread to Syria and Lebanon and Iran.
It was easy times to spread fear and hate, and Cheney and the war mongers of CENTCOM were
riding high. Americans were scared of all Arabs, all Sunnis, all Shiites, from anywhere. They
were all the same in the public's mind. Enemies.
It was perfect and has led to 19 years of endless wars. Add ISIS and al Nusra and the
Taliban and you have an endless soup of enemies.
krugman is a terrible shill for the neo-cons and liberal-interventionists of the 21st
century
at my age, I shouldn't really be surprised any more by what american "intellectuals" and
"nobel prize winners" say about anything..... but I am.
He's neo-liberal interventionist moron of the first rank, and saying what he did actually
normalizes the war mania and war-mongering which has become so staple in mainstream thought
and the "think tanks" and is now practically part of the american DNA and "culture".
shame on krugman
...
It appears the Deep State has attacked the USA's people twice in two decades--on 911 and with
the decision to let as many die as possible by deliberately not doing anything to mitigate
the impact of COVID-19 and allowing the real economy to atrophy so even more will die in the
long run.
Posted by: karlof1 | Sep 11 2020 19:40 utc | 34
Talking about tilting at windmills - I'll never forget Robert Fisk angrily pointing out
that the Yankees knew where to find Al CIA-duh because they extended the cave complex at Tora
Bora to help Al CIA-duh, equipped with 10,000 US Stinger Missiles, kick the Russians out of
Afghanistan in the 1980s!!!
(The Yankees had to wait for 10+ years to invade Afghanistan because it takes that long
for Stingers to pass their Use By date)
@michaelj72. "krugman is a terrible shill for the neo-cons and liberal-interventionists of
the 21st century"
Actually, Paul Krugman was a strong and outspoken opponent of the Iraq War since early
2003 and possibly earlier. He was amongst the few mainstream liberal commentators to take
that stand.
If MoA readers and commenters were to read the entire series of Krugman's tweets, six in
all, they will see mention of how the Bush govt began exploiting the events of 11 September
2001 almost immediately. Though the example Krugman actually uses would make most people
cringe at what it suggests about the bubble he lives in and how far removed it is from most
people's lives and experiences, and his reference to a "horrible war" does not mention either
Afghanistan or Iraq.
It has to be said that Twitter is not designed very well for the kind of informal
conversational commentary that people often use it for. But then you would think Krugman
would use something other than Twitter to discuss and compare 9/11 with the impact of
COVID-19.
The real issue I have with Krugman's Tweet is that he is revising history and bending over
backwards to apologise for Dubya in a way to criticise Donald Trump's performance as
President.
b " Anyone with a functional memory knows that the U.S. reaction to 9/11 was anything but
"pretty calm". It is ridiculous that Krugman is claiming that. "
Careful with that axe b, you are talking about Biden's chief economic adviser and likely
appointee as Chair of the Fed. How does this look?
Volker
Greenspan
Bernanke
Yellen
Powell
Krugman
Reading Krugman's columns in 2016, I had a strong to overwhelming sense that this was a
person revving up for a spot in Hillary's White House or cabinet. For some reason it isn't
hitting me as strongly this time around – he may not have as close connections in
Biden's circle – but it certainly would not be a surprise to see him take a turn
through the media/government revolving door if Trump loses (though, fwiw, I don't think it
will be a job at the Fed).
Yep. Pretty staggering how a few disgruntled ex-CIA contractors managed to, deliberately
or not, help the US Gov't launch the biggest world war operation right under the noses of the
brainwashed masses.
99% of Westerners still are clueless as to explaining the last 20 years in a broader
geopolitical context.
#28: "The antiwar protests in the US were small and insignificant."
No they were not. Millions of people demonstrated against the planned war, in the US,
in the UK, and around the world...
We mustn't forget how the vast majority of those who allegedly were anti-war suddenly went
totally pro-war silent upon Obama coming in.
But that pales compared to the vile spectacle of all the self-alleged
"anti-authoritarians", "anti-propagandists" "dissidents", who suddenly regard the government
media as the literal voice of God, where their alleged God speaks of Covid.
His book, End this Depression Now, is pretty weak. He has no theory of why the crash
occurred. He critiques the austerity agenda but doesn't understand that government spending
CAN create tax liabilities for capital down the road and eat into profits, thus blocking
expanded investments and growth. Moronic libertarians hate Krugman just because they are
right wing assholes who think, like fairies, that a free market without the state will work
fine and self correct. Marx debunked this fairy tale thoroughly in Capital Volume 1, showing
that, even if we start with the mythical free market of libertarian morons, capitalism will
still operate according to the general law by which concentration and centralization lead to
class polarization. In any case, in volume 3 of Capital, Marx develops his laws of crisis,
showing that the cycles of expansion and depression under capitalism follow the movements of
the rate of profit, which itself is determined by the ratio of the value of sunk capital in
production technologies to the rate of exploitation (profits/wages). If the former rises more
than the latter, the rate of profit sinks, along with investment, output and employment.
Financial crises then set in.
The empirical evidence in the data bears out Marx's theory, not Krugman's dumb notion of
aggregate demand, or the stupid libertarian focus on interest rates.
We could discuss here all day about the sociological subject of the American people's true
positioning in the aftermath of 9/11. It would be, sincerely, a waste of time.
The important thing to grasp over this episode - from the point of view of History - is
this: it was a strategic victory for al-Qaeda . The USA took the bait (all scripted?)
and went into a quagmire in Iraq and Afghanistan. In a few years, the surplus the USA had
accumulated with the sacking and absorption of the Soviet space during Bill Clinton
evaporated and became a huge deficit in the Empire's accounts. Not long after, the 2008
financial meltdown happened, burying Bushism in a spectacular way.
There's a debate about the size of the hole the invasion of Iraq and Afghanistan cost the
American Empire. Some put it into the dozens of billions of USDs; others put it into the
trillions of USDs range. We will never know. What we know is that the hole was big enough to
both erase the American surplus and to not avoid the financial meltdown of 2008.
Either the expansion through the Middle East wasn't fast and provided riches enough to
keep up with the Empire's voracious appetite or the invasion itself already represented a
last, desperate attempt by the Empire to avoid its imminent collapse. We know, however, that
POTUS Bush had a list of countries he wanted to invade beyond Iraq (the "Axis of Evil") which
contained a secret country (Venezuela). He was conscious Iraq and Afghanistan wouldn't be
enough. Whatever the case, he didn't have the time, and the financial meltdown happened in
his last year in the White House.
They knew who the perps of 9/11 were: their "own" Saudi irregulars in the CIA's US main
land training camps, who started practicing on the "wrong"- domestic American- targets. These
guys were officially entered without any background checks.
The Bush and Bin Laden families go way back in money making. That is why George had to ponder
so long in that Florida kindergarten after hearing about the attacks: he had a suspicion. The
Saudi only fly out after 9/11 confirms that.
Paul Krugman Is a pro. Completely owned by Deep State. His purpose is to deflect
discussion and prevent questioning the official version of 9/11 , and get people chasing
something completely irrelevant. Well done Paul, most have taken the bait.
DISAGREE ON EVERY SINGLE WORD, in particular with this:
rules/regulations/capital requirements have infected the global banking system and
rendered it a harvesting operation for retail and a derivatives rule/regulation/capital
requirment evasion device for the pursuit of profit
absolutely false.
Banking system is in the 4th part of a cycle that they have created !
The first part has been capital harvesting (1970-1980)
The second part has been deregulation and hunt for stellar return on investment
The third part is financialisation and plunder of real economy
The fourth part is the destruction of real economy through debt, deflation, extreme
financial activity seeking for Yields.
The banks have been the fortresses of globalisation. Commercial banking has been absorbed
by investment banking. In this deflationary environment Commercial Banking has practice NO
ROI.
You want to see the Banks working again?
Reintroduce the Glass Steagall and separate again investment and commercial banking.
Repeal all what has been done between 1987 and 1999.
THAT will stop globalisation, that will stop the slow bleeding-to-death of westerne
economies, that will save commercial banking and our capitalistic societies.
Every stock market bubble begins with a story, and make no mistake -- this is a stock market
bubble. A virus forced the country to shut down and accelerated the gains in a select few
technology stocks that are uniquely capable of thriving with everyone stuck at home. A central
bank took quick action to prevent financial markets from seizing up, pushing interest rates
about as low as they could go.
The stock market now is completely disconnected from the economy. Stein's Law, which he expressed in 1976 states: "If
something cannot go on forever, it will stop."
Notable quotes:
"... Junk Bonds play a critical role in highlighted investor sentiment. When junk bonds (lower-rated debt) is performing well, then that means investors are taking more risks. When junk bonds struggle, that means investors are taking on less risk. ..."
"... At the same time, there is a divergence between the stock market (the S&P 500 made new all-time highs) and Junk Bonds (well below all-time highs and 5 percent off 2019 highs). ..."
As investors, we have several tools and indicators at our disposal.
Whether it is technical indicators such as Fibonacci levels, moving averages, or price
supports, or fundamental indicators such as corporate earnings or economic data, we have a lot
of information to use when making decisions.
Today's chart incorporates both. Junk Bonds play a critical role in highlighted investor
sentiment. When junk bonds (lower-rated debt) is performing well, then that means investors are
taking more risks. When junk bonds struggle, that means investors are taking on less risk.
So today, we highlight the Junk Bonds ETF (JNK). Using
technical analysis, we can see that JNK is trading near line (A), a price level that has served
as support and resistance over the past several years. It is currently serving as price
resistance.
At the same time, there is a divergence between the stock market (the S&P 500 made new
all-time highs) and Junk Bonds (well below all-time highs and 5 percent off 2019 highs).
So this is an important resistance test for junk bonds. Will Junk Bonds (JNK) break down
from here (bearish) or break out (bullish).
What happens here will send an important message to stocks (and investors)!
student life is reduced to a pixilated screen and the college experience is stripped of its
self-realizations and rites of passage...
The question now is whether and to what extent those changes will persist beyond the current
crisis.
Will this mass experiment with online education turn more students on to lower-cost online
degrees, or will it only make the in-person experience of college life seem all the more
valuable?
The pandemic is a monkey wrench dropped into the middle of our cobbled-together
public-private higher-education machine, freezing it up and, just possibly, breaking it.
Financially, colleges need to be open. Their operating budgets depend on tuition revenue,
and schools need students on campus to be spending money in the bookstore or the dining hall or
on sporting events. So there are a few different scenarios floating around right now for fall
instruction. One is a hybrid of virtual and in person. This seems to be the most popular
scenario, where colleges have larger classes being virtual and smaller classes in person in
large spaces where they can better socially distance. We heard of a college considering turning
an on-campus ballroom into a large classroom where students can be better spread out. They're
also looking at adjusting the residential model. Dorms are pretty small, and they're densely
populated. We've heard of schools that are considering buying up local hotels or even casino
spaces in order to give students single rooms so they can better spread out.
(27) In another televised beauty pageant, a high school girl was asked to explain a quote
by Confucius. In response, she said: "Confucius was one of the men who invented
confusion."
(29) An article in Forbes magazine stated that "America's Millennials Are Among the
World's Least Skilled". Specifically, they are short on literacy, numeracy, ability to follow
simple orders, poor at solving problems.
Just as a poetic discussion of the weather is not meteorology, so an issuance of moral
pronouncements or political creeds about the economy is not economics. Economics is a study of
cause-and-effect relationships in an economy.
-- Thomas Sowell
The first lesson of economics is scarcity: There is never enough of anything to satisfy all
those who want it. The first lesson of politics is to disregard the first lesson of
economics.
-- Thomas Sowell
Economics is the painful elaboration of the obvious.
The curious task of economics is to demonstrate to men how little they really know about
what they imagine they can design.
-- Friedrich von Hayek
I can't imagine economists admitting how little they actually know. If they admitted to
themselves, it would hurt their ego. If they admitted to others, it would hurt their job
prospects.
-- Joseph Mattes, Vienna (The Economist, letters December 04, 2010)
The use of mathematics has brought rigor to economics. Unfortunately, it has also
brought mortis .
-- Attributed to Robert Heilbroner
A study of economics usually reveals that the best time to buy anything is last year.
-- Marty Allen
Economic statistics are like a bikini, what they reveal is important, what they conceal is
vital
-- Attributed to Professor Sir Frank Holmes, Victoria University, Wellington, New Zealand,
1967.
Doing econometrics is like trying to learn the laws of electricity by playing the radio.
-- Guy Orcutt
Economists
The First Law of Economists: For every economist, there exists an equal and opposite
economist.
The Second Law of Economists: They're both wrong.
-- David Wildasin
"Murphys law of economic policy": Economists have the least influence on policy where they
know the most and are most agreed; they have the most influence on policy where they know the
least and disagree most vehemently.
-- Alan S. Blinder
An economist is someone who, when he finds something that works in practice, tries to make
it work in theory.
The purpose of studying economics is not to acquire a set of ready-made answers to economic
questions, but to learn how to avoid being deceived by economists.
-- Joan Violet Robinson
An economist is an expert who will know tomorrow why the things he predicted yesterday
didn't happen today.
-- Laurence J. Peter
Having a[n in] house economist became for many business people something like havinga
resident astrologer for the royal court: I don't quite understand what this fellow is saying
but there must be something to it.
-- Linden. (Jan. 11, 1993). Dreary Days in the Dismal Science. Forbes. Pp. 68-70.
Economics is the only field in which two people can get a Nobel Prize for saying exactly the
opposite thing.
Economists do it with models.
-- Heard at the LSE
Bentley's second Law of Economics: The only thing more dangerous than an economist is an
amateur economist!
Berta's Fundamental Law of Economic Rents.. "The only thing more dangerous than an amateur
economist is a professional economist."
Definition: Policy Analyst is someone unethical enough to be a lawyer, impractical enough to
be a theologian, and pedantic enough to be an economist.
Q: Why did God create economists ?
A: In order to make weather forecasters look good.
Q: Why has astrology been invented?
A: So that economy could be an accurate science.
Economists have forecasted 9 out of the last 5 recessions.
An econometrician and an astrologer are arguing about their subjects. The astrologer says,
"Astrology is more scientific. My predictions come out right half the time. Yours can't even
reach that proportion". The econometrician replies, "That's because of external shocks. Stars
don't have those".
When an economist says the evidence is "mixed," he or she means that theory says one thing
and data says the opposite.
-- Attributed to Richard Thaler, now at the Univ of Chicago
The last severe depression and banking crisis could not have been achieved by normal civil
servants and politicians, it required economists involvement.
Taxes
State run lotteries: think of them as tax breaks for the intelligent.
-- Evan Leibovitch
Inflation
Inflation is the one form of taxation that can be imposed without legislation.
-- Milton Friedman
Having a little inflation is like being a little pregnant–inflation feeds on itself
and quickly passes the "little" mark.
-- Dian Cohen
Trade and Trade Barriers
Tariffs, quotas and other import restrictions protect the business of the rich at the
expense of high cost of living for the poor. Their intent is to deprive you of the right to
choose, and to force you to buy the high-priced inferior products of politically favored
companies.
-- Alan Burris, A Liberty Primer
Perhaps the removal of trade restrictions throughout the world would do more for the cause
of universal peace than can any political union of peoples separated by trade barriers.
-- Frank Chodorov
When goods don't cross borders, soldiers will.
-- Fredric Bastiat, early French economist
The primary reason for a tariff is that it enables the exploitation of the domestic consumer
by a process indistinguishable from sheer robbery.
-- Albert Jay Nock
Regulation
Regulation - which is based on force and fear - undermines the moral base of business
dealings. It becomes cheaper to bribe a building inspector than to meet his standards of
construction. A fly-by-night securities operator can quickly meet all the S.E.C. requirements,
gain the inference of respectability, and proceed to fleece the public. In an unregulated
economy, the operator would have had to spend a number of years in reputable dealings before he
could earn a position of trust sufficient to induce a number of investors to place funds with
him. Protection of the consumer by regulation is thus illusory.
-- Alan Greenspan
You fucking academic eggheads! You don't know shit. You can't deregulate this industry.
You're going to wreck it. You don't know a goddamn thing!
-- Robert Crandall, boss of American Airlines, to an unnamed Senate lawyer in 1971
Government
The direct use of physical force is so poor a solution to the problem of limited resources
that it is commonly employed only by small children and great nations.
-- David Friedman
Government Spending
See, when the Government spends money, it creates jobs; whereas when the money is left in
the hands of Taxpayers, God only knows what they do with it. Bake it into pies, probably.
Anything to avoid creating jobs.
-- Dave Barry
I don't think you can spend yourself rich.
-- George Humphrey
Capitalism and Free Markets
A major source of objection to a free economy is precisely that it gives people what they
want instead of what a particular group thinks they ought to want. Underlying most arguments
against the free market is a lack of belief in freedom itself.
-- Milton Friedman
The most important single central fact about a free market is that no exchange takes place
unless both parties benefit.
-- Milton Friedman
The only thing worse than being exploited by capitalism is not being exploited by
capitalism.
-- Joan Violet Robinson
Manufacturing and commercial monopolies owe their origin not to a tendency imminent in a
capitalist economy but to governmental interventionist policy directed against free trade and
laissez faire.
-- Ludwig Mises, "Socialism"
If an exchange between two parties is voluntary, it will not take place unless both believe
they will benefit from it. Most economic fallacies derive from the neglect of this simple
insight, from the tendency to assume that there is a fixed pie, that one party can only gain at
the expense of another.
-- Milton Friedman
States with central-planning regimes [ ] do tend to consume much less energy (and much less
of everything else) [ ] than do Americans. There is a word for that: poverty.
-- The Politically Incorrect Guide to Socialism
Central Banks
Any system which gives so much power and so much discretion to a few men, [so] that mistakes
– excusable or not – can have such far reaching effects, is a bad system. It is a
bad system to believers in freedom just because it gives a few men such power without any
effective check by the body politic – this is the key political argument against an
independent central bank To paraphrase Clemenceau: money is much too serious a matter to be
left to the Central Bankers.
-- Milton Friedman
A central banker walks into a pizzeria to order a pizza.
When the pizza is done, he goes up to the counter get it. There a clerk asks him: "Should I
cut it into six pieces or eight pieces?"
The central banker replies: "I'm feeling rather hungry right now. You'd better cut it into
eight pieces."
Intellectual Property
For one thing, there are many "inventions" that are not patentable. The "inventor" of the
supermarket, for example, conferred great benefits on his fellowmen for which he could not
charge them. Insofar as the same kind of ability is required for the one kind of invention as
for the other, the existence of patents tends to divert activity to patentable inventions.
-- Milton Friedman
Slavery
From the experience of all ages and nations, I believe, that the work done by freemen comes
cheaper in the end than the work performed by slaves.
The work done by slaves, though it appears to cost only their maintenance, is in the end the
dearest of any. A person who can acquire no property can have no other interest but to eat as
much and to labour as little as possible.
Whatever work he does, beyond what is sufficient to purchase his own maintenance, can be
squeezed out of him by violence only, and not by any interest of his own.
-- Adam Smith
Prohibition
It is because it's prohibited. See, if you look at the drug war from a purely economic point
of view, the role of the government is to protect the drug cartel. That's literally true.
-- Milton Friedman
In the Long Run
John Maynard Keynes: "In the long run we are all dead."
Joan Robinson: "Yes, but not all at the same time."
Minimum Wage and Unemployment
The real minimum wage is zero: unemployment.
-- Thomas Sowell
All of the progress that the US has made over the last couple of centuries has come from
unemployment. It has come from figuring out how to produce more goods with fewer workers,
thereby releasing labor to be more productive in other areas. It has never come about through
permanent unemployment, but temporary unemployment, in the process of shifting people from one
area to another.
-- Milton Friedman
Misc
Talk is cheap. Supply exceeds Demand.
It is difficult to get a man to understand something when his salary depends on his not
understanding it.
-- Upton Sinclair
When you start paying people to be poor, you wind up with an awful lot of poor people.
-- Milton Friedman
of course the country could never listen to this guy .it just makes too much damn sense.
-- ryanx0 about Milton Friedman [http://www.youtube.com/watch?v=Se_TJzB9-z0]
Every individual necessarily labors to render the annual revenue of society as great as he
can. He generally neither intends to promote the public interest, nor knows how much he is
promoting it. He intends only his own gain, and he is, in this, as in many other cases, led by
an invisible hand to promote an end which was not part of his intention.
-- Adam Smith, Wealth of Nations
SOCIALISM: You have two cows. State takes one and give it to someone else.
COMMUNISM: You have two cows. State takes both of them and gives you milk.
FASCISM: You have two cows. State takes both of them and sell you milk.
NAZISM: You have two cows. State takes both of them and shoot you.
BUREAUCRACY: You have two cows. State takes both of them, kill one and spill the milk in
system of sewage.
CAPITALISM: You have two cows. You sell one and buy a bull.
Back during the Solidarity days, I heard that the following joke was being told in
Poland:
A man goes into the Bank of Gdansk to make a deposit. Since he has never kept money in a bank before, he is a little nervous.
"What happens if the Bank of Gdansk should fail?" he asks.
"Well, in that case your money would be insured by the Bank of Warsaw."
"But, what if the Bank of Warsaw fails?"
"Well, there'd be no problem, because the Bank of Warsaw is insured by the National Bank of Poland."
"And if the National Bank of Poland fails?"
"Then your money would be insured by the Bank of Moscow."
"And what if the Bank of Moscow fails?"
"Then your money would be insured by the Great Bank of the Soviet Union."
"And if that bank fails?"
"Well, in that case, you'd lose all your money. But, wouldn't it be worth it?"
All models are wrong but some are useful.
-- George Box
I'd rather be vaguely right than precisely wrong.
-- J.M.Keynes; Found in Forbes magazine 01/25/1999 issue. In the Numbers Game column by
Bernard Cohen
Far better an approximate answer to the right question, which is often vague, than an exact
answer to the wrong question, which can always be made precise.
-- J. Tukey
There is an entirely leisure class located at both ends of the economic spectrum
In my US youth we trained with .30 cal Simi auto rifles at public school, and had also at
public school, rifle teams that used .22 target rifles.
Wally was the only white guy on the
teams (there were several schools)...
The racial stuff was all there, but so also was an
intact industrial plant... a fella couldn't walk down the street without stumbling into a
job.
Welder, fitter, fabricator, assembly line work, foundries and forges and shipyards and
mines were running double shifts and the unions were strong...even rich people were afraid to
cross a picketline...
and the income tax was about 75%...
In a long and adventurous life slumming 'round I have been threatened with guns dozens of
time...Every Time a cop was holding the gun, with "one up the spout" (it's "policy") and
finger on the trigger. Not once was there an arrest. Not once. Beatdachitoutta, well, several
times, kidnapped too, but never actually arrested. Actually pretty much a boyscout. And
white. Yes, the cops are azzhones, like Dylan said, the cops doaneed you and man they expect
the same.
I think the "problem" with the views here @ MoA in regard the "civil war" lies in
fundamental assumptions.
Simply try assuming that the US has ended, what you're seeing is denouement. Then forget
about it...it's like chemistry, and "da fat's in da fire". Outcome is backed in. Like the
corpse rotting back to it's constituent chemistry.
Igor Panarin's prediction, and also Deagle's prediction, may well be the proximate
situation when the reaction bombe cools off.
The fact that a delusional "ruling class" is at war with itself as well as the common
people stands as strong evidence...
In a sense the USA is a theocratic society with neoliberal religion as the state religion. Not that different from the
USSR whioch also was a theocratic society with some perversion of Marxism as the state religion.
I capitulate. Ron you are correct, we are post peak.
Post Peak
OK, now what?
It is so strange to be post-peak and not have high prices for crude,
and food.
I guess that will be coming.
note- biofuels should not be counted in liquids tally. It is a different animal, with the
source being dependent on farming and soil, not drilling and geology. Just because ethanol is
used for propulsion shouldn't matter- electrons and batteries aren't counted either, and
rightly so. Those belong in a different category- transportation energy.
I have argued for several years that peak oil is a low price phenomenon, not a high priced
phenomenon.
The most overrated law in economics is that of supply and demand. This law suffers from
what Richard Feynman called "vagueness" (see https://www.youtube.com/watch?v=EYPapE-3FRw
). The problem is that it is always satisfied and hence gives absolutely no information about
prices.
Another problem with market theory (beyond vagueness) is that it lacks a time axis.
The theory states that the relationship between price and supply moves along the demand
curve, but doesn't say how fast, just that "in the long run" the system will reach
equilibrium. Being in equilibrium means being somewhere on the demand curve.
So for example, if prices go up, the demand quantity is expected to go down. The question
is when.
Where does this go wrong? In classical market theory, for example, unemployment is
impossible, because if labor supply outstrips demand prices (wages) should fall until until
equilibrium is attained. This has been observed to be false on many occasions, including
right now.
As Feymann states in the video, "If it disagrees with experiment, it's WRONG! That's all
there is to it." Classical economics isn't just too vague, it is wrong.
Keynes joked about this that in the long term we'll all be dead. He meant equilibrium will
never be reached, so we are never on the demand curve. He argued that "sticky prices",
meaning the unwillingness to accept pay cuts, kept labor markets permanently out of
equilibrium.
It's worth pondering whether oil prices are "sticky" as well. Saying yes is saying the law
of supply and demand doesn't apply (in the short term). This year we have seen that both
OPEC's politicking and panicky traders can cause wild swings in price unrelated to supply and
demand.
Where market theory is vague is the shape of the demand curve. For example, if oil supply
can't meet demand in the near future, as some here have posited, how high will prices go?
Some claim it will go over $200, as people get desperate for it. Some claim that higher
prices would increase efforts to find and drill more, putting a lid on prices. Some claim the
shortage would crash the world economy, depressing prices. Some claim that faced with oil
shortages, the world would simply switch to EVs, or stop wasting the gunk on poorly designed
transportation systems, so prices would stay more or less the same.
Who is right? Nobody knows. So we don't know the shape of the demand curve. The theory is
hopelessly vague.
I have argued for several years that peak oil is a low price phenomenon, not a high
priced phenomenon.
Schinzy,
The price of crude oil is only part of the Peakoil phenomenon. How much is left in the
ground counts, however more important is at which velocity the remaining Gb can be
extracted. I am not a geologist, but common sense says that when an oilfield is well depleted
(50-70%) the most of the remaining barrels will be extracted at a much lower speed, even at
very high oilprices. With secondary and tertiary EOR technology most conventional oilfields
will not produce the same or close to the same amount of barrels/day as before for many more
years. That's also my conclusion from what I have read more than a decade ago.
Of course with high oilprices new, relatively small, oil fields will come online and (more
advanced) EOR will start in other fields, but no matter how you look at it: depletion never
stops. With most oilfields in the world past-peak, only a tremendous amount of money (needed
to develop EOR) can prevent world crude oilproduction from falling like a rock. And all those
EOR technologies will deplete oilfields faster. Big gains in the beginning, more
disappointments later.
Will there be significant amount of shale oil developed in the future in other countries than
the U.S. ? If so, is that wise, regarding an already existing runaway climate change ?
Modelling political instability is the subject of cliodynamcs, see https://en.wikipedia.org/wiki/Cliodynamics
. The graph on that page seems to link political instability with inequality. My suspicion is
that it is also linked to scarcity.
Wall Street is very story driven. They wasted a decade throwing money at tight oil and
lost billions. It's hard to see how this tight oil story gets resuscitated. The '10s saw free
debt, low regulatory regime, no effective alternatives to oil, skilled work force, entrenched
globalized oil markets, no pandemics, etc, and they STILL lost hundreds of billions. Wall
Street wants to lose their money in new ways. At least they get some novelty out of it.
"... $40s WTI and Brent are wholly unsustainable prices. I'd argue that $50s and $60s are also if growth is being sought outside of a few areas. ..."
"... SS, there is no doubt that the pandemic will hasten peak oil supply. Many shut-in wells will not re-open. Frac spreads are being sold for scrap. Rigs are being decommissioned. Plus we are still producing at 80 to 90% of former levels. That means depletion is still continuing. So when they do get around to producing flat out again, the oil will just not be there. ..."
"... close to 100,000 job losses in the oil industry, many folks in their 50s and 60s. Hard to see how they bring folks on for another boom with the loss of all that skilled labor. ..."
"... So, maybe $100 oil over a period of time could turn this tide, but sub-$50 WTI sure won't. ..."
"... Yes, the future is hard to predict. But absent some tremendous financial return potential, why would young people have any interest in making a career of US upstream E & P? ..."
OPEC peaked in 2016, Russia peaked in 2019, and the USA very likely peaked in 2019 also.
And the vast majority of all other nations have peaked also as evidenced by their continuing
decline. That should be enough evidence for anyone.
SS, there is no doubt that the pandemic will hasten peak oil supply. Many shut-in
wells will not re-open. Frac spreads are being sold for scrap. Rigs are being decommissioned.
Plus we are still producing at 80 to 90% of former levels. That means depletion is still
continuing. So when they do get around to producing flat out again, the oil will just not be
there.
As to the longevity of the pandemic, one can only guess. But things will never be back to
the free and easy ways of the past. International travel will never be back to what it once
was. There will be fewer travel vacations even within nations. The possibility of the virus
returning will forever be on everyone's mind.
Also close to 100,000 job losses in the oil industry, many folks in their 50s and 60s.
Hard to see how they bring folks on for another boom with the loss of all that skilled
labor.
Once that a, in most cases, curative combination of medicines is available and one or a
few very effective vaccins are registered and rolled out, it remains to be seen how 'normal'
life will get again.
I don't think the virus will be forever on everyone's mind. Already now many young people
have started to party like before the pandemic, even in Europe (infections rising in almost
all European countries, so a lot of 'Trumpites' and Bolsonarites' also in Europe).
When vaccines are widely available at least everyone who is planning to travel by plane
will be going to get a vaccin.
A good chance that vacations and air travel is close to normal somewhere in 2022 or 2023.
The pandemic will eventually subside an the US and other nations that have responded
poorly to the pandemic will eventually learn from nations that have responded relatively
better, compare Europe and US.
If peak supply is reached, but demand resumes 1% annual growth, I expect we will soon see
Brent at $65/bo+/-5 at minimum, by 2025 to 2030.
Dennis. Brent $65 in 2025-30 is only helpful if one or both of the following happens:
1. Capital markets continue to the pattern of 2015-19 and fund drilling that provides
marginal returns or losses, but has no hope of providing superior returns.
2. Some other new, economical supply source is discovered.
Low oil prices to 2025-2030 would seem to mean supply will be constrained unless one or
both of the above occur.
Conventional oil pretty much peaked in 2005.
I look at $10K invested in a major oil company in 2010. I look at $10K invested in a shale
company in 2010. I then compare that to the S&P 500 return since 2010, all other industry
groups, specific companies, etc.
Investing in oil is like investing in tobacco. The only allure is yield. Upstream E &
P will have to keep borrowing to pay the dividend even if oil returns to $50 Brent. Same with
$60 Brent.
Dennis. One thing that you are missing is just how poor the future of the upstream oil
industry is.
When the shale boom started, EV's were a pipe dream.
When the shale boom started, there wasn't widespread sentiment against oil. Global
warming/climate change was on the radar, but not like now.
BP is trying to remake itself in large part because they cannot find talented and skilled
younger workers who want to work for a fossil fuel company.
We have been in this industry since the 1970s. We have some of the best leases in our
field and have made more money in this industry than in our professions or in other
investments. There is a third generation in our family ranging from late teens to mid
twenties. None are interested at all in this family business/investment. Same for one of my
best friends who makes his living at this. Same for another, whose engineer son started
working with him out of college, but before oil crashed in 2014 left and took a job in a
"Green Energy" field.
Mike is in the same boat.
I know all of the major players in our field. All companies are family owned. There are a
total of four in all of those families working in oil and gas who are under the age of 50,
and those four are at or nearing 40, and started working in their family oil companies at
least over 15 years ago.
As I have posted before, our employees range from 47-61 years of age. The two we hired who
were in their twenties have both long ago left, and no longer work in upstream E & P.
We have participated in some Zoom meetings with the National Stripper Well Association.
Almost all on those meetings is old (50-80 years old).
We hope to sell out on the next recovery, if that ever comes. But we are concerned there
will not be any buyers.
So, maybe $100 oil over a period of time could turn this tide, but sub-$50 WTI sure
won't.
Yes, the future is hard to predict. But absent some tremendous financial return
potential, why would young people have any interest in making a career of US upstream E &
P?
I capitulate. Ron you are correct, we are post peak.
Post Peak
OK, now what?
It is so strange to be post-peak and not have high prices for crude,
and food.
I guess that will be coming.
note- biofuels should not be counted in liquids tally. It is a different animal, with the
source being dependent on farming and soil, not drilling and geology. Just because ethanol is
used for propulsion shouldn't matter- electrons and batteries aren't counted either, and
rightly so. Those belong in a different category- transportation energy.
I have argued for several years that peak oil is a low price phenomenon, not a high priced
phenomenon.
The most overrated law in economics is that of supply and demand. This law suffers from
what Richard Feynman called "vagueness" (see https://www.youtube.com/watch?v=EYPapE-3FRw
). The problem is that it is always satisfied and hence gives absolutely no information about
prices.
Another problem with market theory (beyond vagueness) is that it lacks a time axis.
The theory states that the relationship between price and supply moves along the demand
curve, but doesn't say how fast, just that "in the long run" the system will reach
equilibrium. Being in equilibrium means being somewhere on the demand curve.
So for example, if prices go up, the demand quantity is expected to go down. The question
is when.
Where does this go wrong? In classical market theory, for example, unemployment is
impossible, because if labor supply outstrips demand prices (wages) should fall until until
equilibrium is attained. This has been observed to be false on many occasions, including
right now.
As Feymann states in the video, "If it disagrees with experiment, it's WRONG! That's all
there is to it." Classical economics isn't just too vague, it is wrong.
Keynes joked about this that in the long term we'll all be dead. He meant equilibrium will
never be reached, so we are never on the demand curve. He argued that "sticky prices",
meaning the unwillingness to accept pay cuts, kept labor markets permanently out of
equilibrium.
It's worth pondering whether oil prices are "sticky" as well. Saying yes is saying the law
of supply and demand doesn't apply (in the short term). This year we have seen that both
OPEC's politicking and panicky traders can cause wild swings in price unrelated to supply and
demand.
Where market theory is vague is the shape of the demand curve. For example, if oil supply
can't meet demand in the near future, as some here have posited, how high will prices go?
Some claim it will go over $200, as people get desperate for it. Some claim that higher
prices would increase efforts to find and drill more, putting a lid on prices. Some claim the
shortage would crash the world economy, depressing prices. Some claim that faced with oil
shortages, the world would simply switch to EVs, or stop wasting the gunk on poorly designed
transportation systems, so prices would stay more or less the same.
Who is right? Nobody knows. So we don't know the shape of the demand curve. The theory is
hopelessly vague.
A comment posted on ^peakoil.com^ . Interesting .
"The price action of WTI shows it quite clearly that the non oil extracting part of the
economy can't afford to pay a high enough price that would allow the extracting, processing
and delivery of oil products to it.
It's that simple, most of the oil still in the ground will stay there unless somehow you
find a way to pay $100++ per barrel. The last 12 years has shown that we can't!
The best yearly average weekly price of WTI was right around $100
Average weekly price of WTI for years 2008 thru 2013 was $88.
Average weekly price of WTI for years 2014 thru 2019 was $53.
The trend is what it is and it shows no signs of changing, the price of WTI is still
hitting lower lows and lower high.
I have no idea what the future will bring but the next 3 years are going to be interesting
and not in a good way.
Have fun everyone."
Dennis,repeating myself ,the price of oil is going to trend down . Supply and demand
curves do not apply where the world^s economic system is now placed . Alimbiquated has done a
very good job explaining that .
Much of the fall in output of the other 9 is from Iran, Nigeria, Libya, and Venezuela,
much of that decline is due to political problems
No doubt it was. But political upheaval is part of the story, and always will be. There
will be political problems ongoing for decades. Dennis, if your model excludes political
problems, then you are living in a dream world.
Anyway, in addition to the political problems that you point out in those four nations,
which will most likely continue, we have the natural decline in the other five nations in the
chart below.
Yes and oil prices have been low from Nov 2018 until now, do you expect that to continue
for the next 10 years? I do not, perhaps that's the difference. 2025 to 2030 there is likely
to be a new peak for World C plus C centered 12 month average output probably 1 to 3 Mb per
day higher than the Nov 2018 peak. This assumes oil prices reach $64/bo or higher in 2020$ by
June 2030.
I seem to recall, not too long ago, various talking heads prattling on about how USA LTO
is now the new "swing producer"/source of swing supply. I guess we'll now get to see how well
it swings on and off, as swing producers are wont to do.
My WAG is that it doesn't swing back on so well, as the swing off phase seems to be damaging
(not just a tap you see), and when demand recovers after COVID, circa 2023, we'll see a price
run up. Perhaps it'll be a damaging price run up. 2023 will be in the middle of Biden's first
term, presumably.
And: Nigeria and Venezuela could ramp up their production only very, very slowly. They
could not stem the general trend. Lybia is too little to make any serious difference. The
only real wildcard is Iran. And it's the less probable to be played.
The economy will roll over soon, probably by early 2021. Whatever party has the presidency
won't matter. As the Dollar dies, so will the country because the dollar's status is the only
thing preventing hyperinflation and a total lockup of everything that moves at least for a
few months.
The carnival barkers in both parties are just rearranging the deck chairs on the Titanic.
If you haven't stocked up on food, water and ammo you better do so now.
Lawlessness in the major cities is just the opening act. Wait till people are hungry and
thrown out on the streets due to the stupidity of the Covid lock down madness.
I capitulate. Ron you are correct, we are post peak.
Post Peak
OK, now what?
It is so strange to be post-peak and not have high prices for crude,
and food.
I guess that will be coming.
NOTE:
biofuels should not be counted in liquids tally. It is a different animal, with the
source being dependent on farming and soil, not drilling and geology.
Just because ethanol is
used for propulsion shouldn't matter -- electrons and batteries aren't counted either, and
rightly so. Those belong in a different category- transportation energy.
I have argued for several years that peak oil is a low price phenomenon, not a high priced
phenomenon.
The most overrated law in economics is that of supply and demand. This law suffers from
what Richard Feynman called "vagueness" (see https://www.youtube.com/watch?v=EYPapE-3FRw
). The problem is that it is always satisfied and hence gives absolutely no information about
prices.
Another problem with market theory (beyond vagueness) is that it lacks a time axis. The theory states that the relationship between price and supply moves along the demand
curve, but doesn't say how fast, just that "in the long run" the system will reach
equilibrium. Being in equilibrium means being somewhere on the demand curve.
So for example, if prices go up, the demand quantity is expected to go down. The question
is when.
Where does this go wrong? In classical market theory, for example, unemployment is
impossible, because if labor supply outstrips demand prices (wages) should fall until until
equilibrium is attained. This has been observed to be false on many occasions, including
right now.
As Feymann states in the video, "If it disagrees with experiment, it's WRONG! That's all
there is to it." Classical economics isn't just too vague, it is wrong.
Keynes joked about this that in the long term we'll all be dead. He meant equilibrium will
never be reached, so we are never on the demand curve. He argued that "sticky prices",
meaning the unwillingness to accept pay cuts, kept labor markets permanently out of
equilibrium.
It's worth pondering whether oil prices are "sticky" as well. Saying yes is saying the law
of supply and demand doesn't apply (in the short term). This year we have seen that both
OPEC's politicking and panicky traders can cause wild swings in price unrelated to supply and
demand.
Where market theory is vague is the shape of the demand curve. For example, if oil supply
can't meet demand in the near future, as some here have posited, how high will prices go?
Some claim it will go over $200, as people get desperate for it. Some claim that higher
prices would increase efforts to find and drill more, putting a lid on prices. Some claim the
shortage would crash the world economy, depressing prices. Some claim that faced with oil
shortages, the world would simply switch to EVs, or stop wasting the gunk on poorly designed
transportation systems, so prices would stay more or less the same.
Who is right? Nobody knows. So we don't know the shape of the demand curve. The theory is
hopelessly vague.
I have argued for several years that peak oil is a low price phenomenon, not a high
priced phenomenon.
Schinzy,
The price of crude oil is only part of the Peakoil phenomenon.
How much is left in the
ground counts, however more important is at which velocity the remaining Gb can be
extracted. I am not a geologist, but common sense says that when an oilfield is well depleted
(50-70%) the most of the remaining barrels will be extracted at a much lower speed, even at
very high oilprices.
With secondary and tertiary EOR technology most conventional oilfields
will not produce the same or close to the same amount of barrels/day as before for many more
years. That's also my conclusion from what I have read more than a decade ago.
Of course with high oilprices new, relatively small, oil fields will come online and (more
advanced) EOR will start in other fields, but no matter how you look at it: depletion never
stops.
With most oilfields in the world past-peak, only a tremendous amount of money (needed
to develop EOR) can prevent world crude oil production from falling like a rock. And all those
EOR technologies will deplete oilfields faster.
Big gains in the beginning, more
disappointments later.
Will there be significant amount of shale oil developed in the future in other countries than
the U.S. ? If so, is that wise, regarding an already existing runaway climate change ?
Hands up those who think the election will only have a 'marginal' effect?
"Testing Theories of American Politics: Elites, Interest Groups, and Average Citizens
Martin Gilens and Benjamin I. Page
Each of four theoretical traditions in the study of American politics -- which can be
characterized as theories of Majoritarian Electoral Democracy, Economic-Elite Domination, and
two types of interest-group pluralism, Majoritarian Pluralism and Biased Pluralism -- offers
different predictions about which sets of actors have how much influence over public
policy: average citizens; economic elites; and organized interest groups, mass-based or
business-oriented. A great deal of empirical research speaks to the policy influence of
one or another set of actors, but until recently it has not been possible to test these
contrasting theoretical predictions against each other within a single statistical model. We
report on an effort to do so, using a unique data set that includes measures of the key
variables for 1,779 policy issues.
Multivariate analysis indicates that economic elites and organized groups representing
business interests have substantial independent impacts on U.S. government policy, while
average citizens and mass-based interest groups have little or no independent
influence.
The results provide substantial support for theories of Economic-Elite Domination and for
theories of Biased Pluralism, but not for theories of Majoritarian Electoral Democracy or
Majoritarian Pluralism. "
Hey there! It's me, the stock market. I know it's weird to write you like this, but I felt
like I needed to drop a quick thank-you note for everything you've done for me this year. I
mean, your big ol' balance sheet is almost $3 trillion larger since early March! You're backing
up the truck and loading it with Treasuries and corporate bonds and bond ETFs, all to keep the
competition to stocks from fixed-income yields as limited as Jim Cramer's understanding of me.
It's been a dream come true, honestly. I mean, fess up: Have you been reading my diary?!
... ... ...
So please do me a solid and keep this thank-you note in mind when you host your virtual
Jackson Hole summit. No cowboy stuff, OK? If I hear anybody mutter something about "irrational
exuberance," I swear I'm gonna blow my top and hurt a few of these Robinhood types, you got
that? The Lord giveth, and the Lord taketh away. It's what I do -- and I'm good at it! But
right now, this is still a lot of fun for me...
The disconnect between the all time highs in the stock market and the broader economy has
never been greater (with even Janet Yellen , one of
the main architects of this disconnect, agreeing), and one of the places where this chasm is
most glaring, is in the staggering number of major corporations filing for bankruptcy in 2020.
Indeed, this year large US corporate bankruptcy filings are running at a record pace and are
set to surpass levels reached during the financial crisis in 2009 (when the S&P was far
from an all time high).
According to FT calculations , as of
August 17, a record 45 companies each with more than $1 billion in assets has filed for Chapter
11 this year; this compares with 38 for the same period of 2009 during the depths of the
financial crisis and is more than double last year's figure of 18 over the comparable period
.
In total, 157 companies with liabilities over $50 million have filed for Chapter 11
bankruptcy this year and as we warned several
months ago, many more are coming.
"We are in the first innings of this bankruptcy cycle. It will spread far across industries
as we get deeper into the crisis. It's going to be a bumpy ride," said Ben Schlafman, chief
operating officer at New Generation Research.
The spike in bankruptcies comes despite trillions of dollars in government aid to mitigate
the fallout of the coronavirus pandemic on businesses, highlighting the catastrophic and
lasting impact Covid-19 is having on the US economy. Or perhaps those trillions in government
aid are going to the wrong recipients, and as a result companies that stand to benefit from
mass defaults are now sporting record market caps. In fact, the irony is that in its pursuit to
crush monopolies such as Amazon and Google, the government has made them bigger and stronger
than they have ever been.
Meanwhile, with the US economy driving right over the fiscal cliff as Congress failed to
extend emergency covid benefits, sending spending by those receiving Unemployment Insurance
sharply lower ...
... and millions of Americans about to lose their job (again), a new default wave is just
waiting to be unleashed.
"Ending the $600 per week federal unemployment benefits will push tens of millions of
Americans into, or uncomfortably close to, poverty. They won't have the money to buy billions
of dollars worth of goods and services. As a result, the entire economy will suffer. Small
businesses will continue to suffer the most because they're already precarious," said Robert
Reich, Bill Clinton's labor secretary.
For now, the brunt of the default wave has been felt by oil and gas companies as low (and on
one historic occasion, negative) crude prices crippled dozens of businesses. There have been 33
filings to date according to the
Oil Patch Bankruptcy Monitor from Haynes and Boone, including Chesapeake, Whiting Petroleum
and Diamond Offshore Drilling. There were only 14 last year.
While not quite as bad as the E&P sector, retail businesses with assets of more than $50MM
have also been severely affected with 24 filing for bankruptcy, a three-fold jump from last
year. They have been among the hardest hit by the government-mandated lockdowns, which
prevented stores from opening and drove consumers to online retailers such as Amazon. Burdened
by debts, some of which were built up under private equity ownership, several prominent
retailers have been forced to file for Chapter 11.
Some of the most iconic names that have filed this year include Neiman Marcus, which
struggled for years with a heavy debt burden from its 2005 leveraged buyout by TPG and Warburg
Pincus, and which finally filed for bankruptcy in May with liabilities of $6.7bn. JCPenney,
also saddled with billions in debt, filed for Chapter 11 bankruptcy in May. Brooks Brothers,
the venerable suit retailer that once counted Abraham Lincoln and John F Kennedy among its
clients, did the same in July.
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"The Covid-19 pandemic is reshaping consumer buying habits. Therefore, we will continue to
see large retail, energy, and transportation businesses taking advantage of the tools provided
by a formal bankruptcy to restructure to be more profitable and competitive in the long term,"
said Deirdre O'Connor, managing director of corporate restructuring at legal services group
Epiq.
And while several businesses tried to reopen in late May and June (and some amusingly tried
to unfile for bankruptcy just so they were eligible for bailout loans), a recent flare-up in
coronavirus cases and deaths in several US states choked the recovery, forcing many business
owners to close again.
"It pains me to say this, but bankruptcy is a growth industry in America," New Generation's
Schlafman dismally concluded.
The last recession, from 2007 to 2009, was brutal because of twin crashes in both the financial and housing markets. The
S&P
500 plunged 56%
from top to bottom, and
home
values fell 27%
. The daunting loss of wealth took years to recover and left prolonged scars on the U.S. economy.
These twin bubbles are detached from what's happening in the real economy, where unemployed has nearly tripled, from 5.8 million
workers in February to 16.3 million now. Most
broad
measures of economic activity
show that the coronavirus recession bottomed out in May, with gradual progress since then. But
we've only recovered about one-third of the jobs and output we've lost, and there's no sign of a quick improvement any time soon.
A return to normal only seems possible once there's a widely available coronavirus vaccine, maybe within 9 or 12 months.
The Fed's aggressive action is a political lifeline to President Trump, who would have a far worse mess to explain to voters if
the Fed weren't administering emergency CPR. As is, millions of Americans benefiting from the twin bubbles stoked by the Federal
Reserve might feel okay. The
S&P
500 set a record high this week
, with the index now up 52% from its bear-market low on March 23. Many analysts say it makes
no sense for stocks to be on a tear while the real economy is on its knees, but if you sold stocks today for a 51% gain that
would be real money in your bank account. Those gains are largely due to the Fed goosing asset prices, but that doesn't make the
money less real.
Homeowners are benefitting, too. Historically low mortgage rates
pushed
existing home sales
to the highest level in 14 years this week. Sales of new homes are soaring, too, and the increased demand
is pushing home values up.
This might seem unfair. The Fed's actions are benefiting shareholders and homeowners, who arguably need help least. But it's the
usual trickle-down wait for families not lucky enough to own stocks or real estate. But for all its might, the Fed has limited
power to reach into the economy and target aid beyond financial markets. That's Congress's job. And this economy would be
dreadfully worse if the stock-market was down 30% or 40% and homeowners were losing equity rather than gaining it.
This week's Trump-o-meter reads WEAK, the third-lowest rating, which is an improving over the FAILING and SAD readings of the
last several weeks.
Source: Yahoo Finance
More
Trump still faces an uphill path to reelection, on account of his dismissive response to the coronavirus, which has kept the
economy from entering the quick, V-shaped recovery he's hoping for. Democratic nominee Joe Biden leads Trump by
7.4
percentage points nationally
, a larger edge than Hillary Clinton had over Trump at the same point in 2016. Biden's Democrats
held a solid virtual convention this week, and Biden easily disproved Trump's claim that he's senile. Trump will now fill the
airwaves with his own four-day nominating convention, though he could be upstaged by the
mounting
uproar at the postal service
, the
strange
new indictment
of his 2016 campaign manager Steve Bannon or some other brewing scandal.
With 10 weeks until the election, the economy shows halting progress, suggesting it may not be much better by the time voters
cast their ballots. The Oxford Economics weekly economy tracker improved slightly this week, but initial unemployment claims once
again shot past the startling 1 million level. In
a
new Yahoo Finance-Harris poll
, 51% of respondents said they expect the economy to worsen within the next three months, while
only 31% expect it to improve. Trump obviously hopes otherwise, and he will likely claim exaggerated progress as the election
hits the home stretch. After all, look at that record stock market.
The broad market (S&P 500) is trading at the highest forward PE multiples since November
1999, but the financial press is rife with mendacious piffle claiming there is no bubble. For
example, in celebration of Tuesday's all-time high on the S&P 500, one James Mackintosh of
the Wall Street Journal minced no words:
Except, the Everything Bubble is in the imagination of the many investors complaining
about it. First, it isn't everything. Second, it isn't a bubble .
Right. Supposedly, the above statement is true because energy sector stock prices are in the
tank, but the market is being rationally led by the tech giants where allegedly solid prospects
for earnings growth are being rewarded with higher PE multiples owing to ultra-low interest
rates.
...Lower rates mean profits further in the future matter more to the share price , so
companies with steady earnings no matter what the economy does are worth more. Those that are
sensitive to the economy are worth less, because future earnings are expected to be hit.
Growth stocks do incredibly well, because their future earnings are expected to be higher
and, at least for those thought immune to economic weakness, worth more as well thanks to
lower rates.
Apply this framework and there's no bubble. U.S. stocks are more highly valued than in the
past because they are dominated by big growth stocks, themselves justifiably more highly
valued thanks to low rates.
The sheer laziness and conformism of today's so-called financial journalists is a wonder to
behold. When the leader of the tech growth stocks, Apple, crossed the $2 trillion market cap
barrier for the first time today, thereby embodying more market cap than the entire Russell
2000 of small cap US companies, Mackintosh's colleague at the Wall Street Journal spewed the
same groupthink:
The stock has more than doubled from its March 23 low, boosted by steady demand
for the company's devices and better-than-feared results in its core iPhone business as
millions of Americans work from home.
Steady sales growth is driving the string of achievements. Apple's sales rose to $260
billion in the fiscal year ended in September from $216 billion three years prior. The
company has even grown sales during the pandemic: For the quarter ended in June, they rose
11% from a year earlier to nearly $60 billion, exceeding Wall Street expectations. Earnings
surged to $11.25 billion.
Apple is not a growth stock. Period.
The three-year sales gain cited by the WSJ amounted to only 6.4% per annum, but also
reflects what amounts to journalistic malpractice.
That's because the starting figure of $216 billion for Apple's FY 2016 sales actually
reflected a 7.8% decline from sales of $234 billion in FY 2015. So the four-years growth rate
of sales through FY 2019 was, well, a mere 2.67% per annum.
Likewise, the 11% sales gain during the June 2020 quarter versus prior year is completely
misleading. During the past four quarters, the year-over-year sales gains have been all over
the lot, posting at 10.9%, 1.0%, 8.8% and 1.8% respectively. Accordingly, for the LTM period
ended in June, the sales gain was just 5.7% – hardly a barn-burning growth figure.
Likewise, the purported June quarter earnings "surge" to $11.25 billion was nothing of the
kind. During the 2018 June quarter, for instance, net income posted higher at $11.52 billion .
The surging at issue, therefore, was one of backward motion.
In fact, the only thing about Apple which has been in a growth mode during the last five
years is the company's PE multiple, which has essentially doubled from 14X to 35X at today's
record share price.
As to the actual 5-year trend of sales and earnings growth, not so much.
Back in June 2015 Apple was valued at $715 billion on the strength of its unparalleled tech
product franchise, which was reflected in $224 billion of annual sales and $50.7 billion of LTM
profits.
Still, there was a reason for the modest implied PE multiple of 14.1X : Namely, the tech
behemoth's growth rate was rapidly slowing – freighted down by the inherent limits
embedded in its enormous scale and the then modest expectations for earnings expansion in the
immediate years ahead.
Those modest expectations were accurate. Five years later, the LTM figures for June 2020
came in at $273.9 billion of sales and $58.4 billion of net income.
Yes, the latter figure represents a lot of profits, but it embodies hardly a modicum of
growth. In fact, Apple's five-year sales growth rate was just 4.1% , while its net income
growth rate clocked in at only 2.9% per annum.
Moreover, there has been no recent growth spurt to accelerate these five-year trend rates of
growth. The two-year growth rates are even slower, with sales posting at 3.6% per annum and net
income rising by just 2.03% per year. Wiser:
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Needless to say, the doubling of Apple's PE multiple has nothing to do with its punk
five-year net income growth rate of 2.9% per annum; it's about the Fed's radical repression of
interest rate and the resulting diversion of trillions of borrowed capital into the inflation
of risk asset capitalization rates.
Nor is Apple some kind of outlier, albeit it is the monster of the tech midway. Overall, the
so-called Fab Five (Amazon, Apple, Microsoft, Facebook and Google) reflect the same multiple
inflation story; and they are obviously the pile driver that is pushing the heavily ETF and
indexer-driven stock market up into the nosebleed section of history.
Thus, back in June 2014, the Fab Five's combined market cap weighed-in at $1.63 trillion and
accounted for 9.5% of the overall S&P 500's market cap of about $17.0 trillion .
Fast forward six years, and the Fab Five were valued at today's close at $7.1 trillion ,
which accounts for 26% of the $27.7 trillion total market cap of the S&P 500.
So, yes, the term "pile-driver" is probably an understatement. Fully 50% of the S&P
500's $10.7 trillion market cap gain since June 2014 is attributable to the Fab Five.
At the same time, the combined net income of the Fab Five has risen from $76.3 billion to
$170.7 billion, meaning that the already frisky PE multiple of 21.4X for the group as a whole
in June 2014 has now stands at 42.0X .
Obviously, averages can be misleading, but they do not lie. The composite net income growth
rate of the Fab Five "growth stocks" has been just 14.4% over the past six years.
In a world which is literally unwinding at the seams owing to the Covid pandemic and a $260
trillion burden of debt, a valuation multiple equal to 42X or nearly three times the trailing
growth rate makes no sense whatsoever.
That's because the James Mackintosh groupthink cited above is marred with a mighty flaw. To
wit, you can't value earnings into the indefinite future owing to today's ultra-low interest
rates that are definitely not sustainable.
The Fed's policy of radical interest rate repression simply defies the laws of finance and
common sense because real yields are negative, and in the long-run negative real yields are an
oxymoron.
The chart below is the smoking gun. Once upon a time there was meaningful daylight between
the brown line (nominal yield on the benchmark 10-year UST) and the purple line (running
inflation rate measured by the 16% trimmed mean CPI).
That is, even so-called risk-free US Treasury debt had a real yield of 200-400 basis points
to account for taxes and a real return on investment.
But after the final leap into monetary madness commencing with the financial crisis of
2008-2009, the real yield had virtually disappeared; and then after the massive $3 trillion Fed
bond-buying spree commencing in mid-March, the benchmark security of the entire global fixed
income market went deeply negative in real terms.
As of the latest month, the running inflation rate clocked-in at 2.27% (June LTM) compared
to an all-time low yield on the 10-year UST of 52 basis points a few weeks back.
Needless to say, when the real cost of risk-free benchmark debt is negative 175 basis points
, you are not in an indefinitely sustainable steady state. You are actually courting financial
disaster.
That's especially because fiscal policy in the US and elsewhere around the world has become
completely unhinged.
So unless the Fed and other central banks continue their massive bond purchases in response
to this tsunami of public debt, the bond pits are heading for a train-wreck some time soon; and
if the central banks continue to print at current lunatic rates, the monetary system itself
will go into meltdown.
Still, the misbegotten idea that the stock market isn't overvalued because bond prices have
been massively inflated by central bank money-pumping is just one instance of the present
tyranny of groupthink – called to attention by Apple's crossing the $2 trillion market
cap barrier.
In fact, groupthink is omnipresent in the the mainstream narrative and so-called news. The
nearly universal belief that the Covid-lockdowns were necessary and effective and that the
coronavirus can be stopped by brute-force economic and social regimentation is another case in
point – underscored by a new analysis of the Swedish outcome.
The mainstream narrative, of course, is that Sweden's no lockdown policy – the
schools, restaurants, movies, gyms, malls etc. remained open – was a disastrous failure,
thereby vindicating the universal quarantine approach of Dr. Fauci, Governor Cuomo and the rest
of the Blue State Virus Patrol.
But that's based on the irrelevant observation that Sweden's overall WITH-Covid mortality
rate of 56 per 100,000 is far higher than that of Norway, Finland and Denmark.
The truth is, Sweden's mortality rate happened in the long-term care facilities, where 75%
of the country's 5,800 WITH-Covid deaths to date (August 18) have occurred, and which is
neither here nor there when it comes to lockdowns of the non-elderly population.
Fortunately, a breakdown of Sweden's WITH-covid deaths by detailed age brackets is readily
available and it puts the kibosh on Dr. Fauci's Lockdown Nation folly.
Number of WITH-Covid deaths/ Population/Rate per 100,000 by age cohort:
0-9 years: 1/1.22 million/ 0.08 per 100,000;
10-19 years: 0/1.19 million/ 0.0 per 100,000;
20-29: 10/1.31 million/ 0.77 per 100,000;
30-39 years: 16/1.37 million/ 1.16 per 100,000;
40-49 years: 45/1.31 million/ 3.42 per 100,000;
50-59 years: 162/1.27 million/ 12.8 per 100,000;
60-69 years: 398/1.14 million/ 34.8 per 100,000;
70-79 years: 1,250/.917 million/ 128.7 per 100,000;
80-90 years: 2,408/.425 million/ 567.0 per 100,000;
90 years plus: 1,512/.119 million/ 1,271.0 per 100,000.
So, yes, Sweden has a WITH-Covid mortality rate of 56 per 100,000 for the entire country.
But 26% of those deaths occurred among the population 90 years and older, which accounts for
just 1.1% of Sweden's population.
Similarly, 67% of the deaths were among the population 80 years and older and 93% were among
those aged 65 or more. By contrast, persons 65 and older account for just 19% of Sweden's
population, and the preponderant share of the latter, who have suffered serious illness or
death from the Covid, were already in long-term care facilities and programs.
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Needless to say, locking down the schools, gyms, restaurants and malls does nothing for the
institutionalized population of the vulnerable elderly and co-morbid. Sheltering and treating
the latter in place, rather than quarantining the younger, healthier populations, is the
self-evident answer.
Indeed, the virtue of Sweden's anti-lockdown strategy virtually screams out from the
schedule above. Sweden did not close its schools, yet there has been just one WITH-Covid death
among its 2.4 million school age children under 20 years.
Likewise, there have been just 71 deaths among its 4.0 million prime working and consuming
age population (age 20-49). That's a rounding error mortality rate of 1.77 per 100,000. Who in
their right mind would want to shutdown the economy based on such infinitesimal risks?
Stated differently, the risk of death from Covid in Sweden has been 720X higher for the
largely institutionalized 90 and over population compared to the prime working age group (20-49
years); and has also been 157X higher for the entire population 65 and over than for prime
workers and the population that is the preponderant patron of the social congregation sectors
of the economy.
Fortunately, Sweden also has readily available data on normal, year-in-and-year-out
mortality, which rate is about 862 per 100,000 for the total population. But when you breakdown
these normal mortality rates by age cohort and cause of death, the insanity of Lockdown Nation
become all the more apparent.
Specifically, there are about 3,429 deaths per year in Sweden from auto crashes, falls,
drownings, electrocutions, poisonings and other accidents, and these account for about 4% of
Sweden's 2019 death total from all causes of 89,000.
However, when you look at mortality rates per 100,000 from accidents alone, the starling
result is that the existing risk of death from accidents is far higher than from the Covid for
the entire 8.4 million population under 65 years of age, and for the young and middle-aged
decidedly so.
Mortality rates per 100,000 for accidents versus Covid and ratio of accident/Covid risk:
0-14 years; 1.38 versus 0.06=25X;
15-44 years: 12.3 versus 1.2=10X;
45-64 years: 20.6 versus 15.4=1.34X;
65 years & older: 115 versus 257=0.45X.
In short, when the ordinary risk of death is 10-25X greater for accidents than from the
Covid for the young and working population, you don't shutdown the economy and the main avenues
of social congregation.
Due to enlightened leadership by Sweden's health professionals and leading epidemiologists,
they got it right, and now both new cases and WITH-Covid deaths have virtually disappeared.
And that's to say nothing of the fact, that Sweden's Q2 GDP decline of just 8.6% was far
better than the double digit declines in the US and most European countries, which imposed far
more draconian lockdowns.
In America, by contrast, the tyranny of groupthink on the matter has become so great that
college football and in-person college classes are being closed from coast-to-coast when the
risk of serious illness or death among the college age population here, like in Sweden, is
virtually nil. Roacheforque , 1 hour ago
It never ceases to amaze me what social media has revealed. 90% of people who use social
media are FOLLOWERS. They may have original thoughts but are afraid to express them. So they
copy and paste other people's thoughts as their own, to either intentionally or inadvertently
encourage groupthink.
Social correctness, political correctness and the outrageous fear of 'being different" are
a huge part of the reason as to why meritocracy, individualism and the freedoms and liberties
that come with them, are under attack. It's presented as socialism or even collectivism, but
it's really about conformity, obedience and fear.
In a word "disgusting" to the exceptional people who used to thrive in the merit-based,
free market capitalist environment that is now being obliterated.
Salisarsims , 50 minutes ago
It's mostly sociopaths and psychopaths who thrive in capitalism, and there's nothing merit
based to most of corporate America.
snatchpounder , 38 minutes ago
It's mostly sociopaths and psychopaths who thrive in politics, and there's nothing merit
based to most of corporate America.
fify
worstpersonintheworld , 38 minutes ago
nah it's people with a functioning brain
Cluster_Frak , 8 minutes ago
I thought, it was all about being different among the liberal woke. However, the woke
proved themselves to be nothing but Bolshevik Facist. You either must think what they think
or you are discriminated against. It only took 10 years to reach a point of extreme
intolerance.
NIRP_BTFD , 43 minutes ago
The power of propaganda. People overestimate covid death toll by a factor of 100. Btw not
only in the UK.
UK public 'believe coronavirus death toll 100 times higher than it really is'
Here are a few takeaways from the Democratic Convention:
The Democrats are running on the
same platform they ran on in 2016. The Democrats put style above substance, flashy optics above
ideas or issues. The Democrats think that hollow tributes to "diversity" and "inclusion" will
win the election. The Democrats have abandoned white, working class voters opting instead for
people of color. The Democrats have learned nothing from Hillary Clinton's defeat in 2016.
In 2016, Democrat front-runner, Hillary Clinton lost the election because she failed to see
her support was eroding in the key Rust Belt states of Pennsylvania, Michigan and Wisconsin.
Trump won all three states with a measly 77, 651 votes total. All three states were expected to
go Democrat but flipped to the GOP due to Clinton's support for free trade and immigration
policies that cost jobs and imposed unwelcome demographic changes on the working people of
those states. The Democrats and Hillary have never accepted the factual version of how the
election was lost. Instead, they fabricated a conspiracy theory about Trump colluding with
Russia. Although the Mueller Report proved that the claims of meddling were baseless, Clinton
and the Dems continue to trot them out at every opportunity. On Tuesday at the convention,
Hillary again reiterated the lie that Trump stole the election. She said:
"Vote like our lives and livelihoods are on the line, because they are. Remember: Joe and
Kamala can win 3 million more votes and still lose. Take it from me. We need numbers so
overwhelming Trump can't sneak or steal his way to victory."
The determination on the part of the Democrats to mischaracterize what actually happened in
the election is not a trivial matter. It suggests that deception is central to their governing
style. Party leaders do not think their supporters are entitled to know the truth but rather
believe that events must be shaped in a way that best serves their overall political interests.
For Democrats, lying is not a personal failing, but an opportunity for enhancing their grip on
power. This is from an article in The Guardian:
"Donald Trump's electoral college victory rests on the shoulders of more than 200
so-called "pivot counties" across the US. That is, counties that voted for Barack Obama only
four years earlier. The most decisive of these swings occurred in Pennsylvania's Luzerne
county, nestled in the north-east part of the state There, voters gave Trump a nearly
20-point victory after going for Obama by almost 5% in 2012. But Trump's win in Luzerne
was also noteworthy for its magnitude. His 26,000 vote plurality in Luzerne comprised almost
three-fifths of his plurality in the state as a whole, and with it Pennsylvania's 20 coveted
electoral votes ." ("
The Forgotten review: Ben Bradlee Jr delivers 2020 lessons for Democrats" , The
Guardian )
Critical battleground states tilted in Trump's favor because Democratic policies had
decimated their communities and eviscerated their standard of living. Author Ben Bradlee Jr.
explains this phenom in his book "The Forgotten" which should be required reading at the DNC.
Here's a clip from the review at the Guardian:
"The Forgotten documents the ravages of deindustrialization, lost jobs, crime and drugs.
It captures the sense of displacement tied to a changing and less monochromatic America.
Once upon a time, Luzerne was home to coal and textiles, dominated by Protestants from
Wales and Catholics from Ireland and continental Europe. Not any more. Luzerne is poorer and
smaller, for many a less recognizable place. Not surprisingly, immigration and Nafta come in
for constant criticism. " (The Guardian)
This is the real reason Hillary was defeated. Russia had nothing to do with it. The Dems
abandoned the white working-class people who had always voted for them and began to cobble
together their Rainbow coalition. When Hillary denounced these people as "Deplorables", it
forced more of them to join Trump team. The rest is history. Here's more from the same
article:
"In the absence of a recession, however, the party stands to face the same electoral
map it did in 2016. In fact, Ohio now looks an even tougher nut to crack. Much as the
Democratic base loathes the president, reality cannot be wished away. Luzerne would be a
good place for the party to start addressing this reality. " ( The Guardian
)
The point we're trying to make is that the effectiveness of the Democrat Convention can only
be measured in terms of its impact on potential voters. So, why have the Dems shrugged off any
effort to reach out to the people who could help them win?
It's not that complicated. The Dems are merely abandoning the people who, they believe, will
leave anyway as their globalist economic agenda becomes more apparent putting more downward
pressure on overall living standards. It's worth noting, that when Obama left office in 2016,
this process was already well-underway. According to a Gallup poll, 71 percent of the people
said they were dissatisfied with the way things were going. (in Obama's last year.) Only 27
percent said they're satisfied. So, even though Obama's personal approval ratings remained
high, his handling of the economy was extremely unpopular. (except on Wall Street, of
course.)
During this same period, the PEW Research Center conducted a survey titled: "Campaign
Exposes Fissures Over Issues, Values and How Life Has Changed in the U.S" which showed why
Trump was steadily gaining on Hillary. Here are a few excerpts from the report:
"Among GOP voters, fully 75% of those who support Donald Trump for the Republican
presidential nomination say life for people like them has gotten worse "
"GOP voters who support Trump also stand out for their pessimism about the nation's
economy and their own financial situations: 48% rate current economic conditions in the U.S.
as "poor.
"Within the GOP, anger at government is heavily concentrated among Trump supporters
– 50% say they are angry at government "
"Among Republicans, a majority of those who back Trump (61%) view the system as unfair
among Trump supporters, 67% say trade agreements are bad thing "
"Half of Trump supporters (50%) say they are angry at the federal government . Anger at
government – and politics – is much more pronounced among Trump backers than
among supporters of any other presidential candidate, Republican or Democrat " ("
Campaign Exposes Fissures Over Issues, Values and How Life Has Changed in the U.S ", PEW
Research Center)
So, a higher percentage of Trump supporters think they are getting screwed-over by an unfair
system. They think "free trade" only benefits the rich, they think the government is
unresponsive to their needs, they think the system is rigged, and they're really, really
mad.
So, which speaker at the Democrat Convention addressed the concerns or complaints of white
working-class people who now almost-universally harbor these same feelings??
No one, because no one in the Democrat party plans to do anything about these issues, in
fact, just the opposite. Now that the Dems have been subsumed by Wall Street and their big
globalist donors, things are going to get dramatically worse for working people who will see a
vicious attack on essential social services and programs as soon as the election is over. The
massive build-up of debt– by mainly Democrat Governors who deliberately drove their
states into bankruptcy at the behest of Fauci's Vaccine Gestapo– will now be met by a
growing demand for austerity on a scale unlike anything we've experienced in the last century.
The country is being prepared for an excruciating restructuring that will create a permanent
underclass that will provide an endless source of sweatshop labor for the multinational
carpetbaggers. Those jobs will likely go to members of the Dems rainbow coalition while white,
working class people in America's heartland –with their strong sense of patriotism–
will be seen as a potential threat to the emerging new order.
It's clear that the Dems anticipate resistance to their plan by the contemptible way they
have branded struggling workers as "white nationalists" and "racists". But is it true or are
the Democrats and their deep-pocket allies preemptively denigrating these people and supporting
BLM rioters to head-off growing resistance to their strategy of total control through
widespread mayhem, decimation of the economy and extermination of the American middle class?
Author CJ Hopkins summed it up like this in a recent article at The Unz Review:
"What we are experiencing is not the "return of fascism." It is the global capitalist
empire restoring order, putting down the populist insurgency that took them by surprise in
2016.
The White Black Nationalist Color Revolution, the fake apocalyptic plague, all the
insanity of 2020 it has been in the pipeline all along. It has been since the moment Trump
won the election. No, it is not about Trump, the man. It has never been about Trump, the
man
GloboCap needs to crush Donald Trump not because he is a threat to the empire , but
because he became a symbol of populist resistance to global capitalism and its increasingly
aggressive "woke" ideology . It is this populist resistance to its ideology that GloboCap
is determined to crush, no matter how much social chaos and destruction it unleashes in the
process.. ." (" The White Black
Nationalist Color Revolution" , CJ Hopkins, The Unz Review )
Bingo. It is the "populist resistance to global capitalism" that is the defacto enemy of the
Party elite, the same elites who conspired with senior-level members of the Intelligence
Community, the FBI, the DOJ and the Obama White House to spy on the Trump Campaign, infiltrate
the presidential transition, and to try to topple the elected government. And while the coup
plotters have still not been brought to justice, they are now within spitting distance of their
ultimate objective, which is seizing executive power and using it to crush the fledgling
opposition, impose a one-party system of government, and transform America into a corporate
superstate ruled by Global Capital. Here's a clip from an article by Gary D. Barnett at Lew
Rockwell:
"By the end of this next planned phase of the 'virus' scare, a global reset of the world
economy will be ready to launch. This reset will be mammoth in scope, as everything we have
known will be restructured. Those out of work in the final stage will most likely stay out of
work, pushing the dependency state to new levels sought by the ruling class. Controlling
the population will be a key component of the plan, including population size, birth rates,
movement, and personal contact among individuals. The elimination of normal human interaction
is sought, and this is only the beginning . The ultimate goal is total control, and every
tool in the box of the tyrants will be used to gain that control. Restraint by the ruling
class will be non-existent, as this staged reset is now going forward at a very accelerated
pace." (
"The Economic Insanity of This Coronavirus Pandemic Plot and the Coming Global Reset ",
Lew Rockwell )
The coup plotters have chosen the candidates they want to carry out the next phase of their
operation. All they need now is to win the election.
@ThreeCranes trol -- China had already agreed to play ball, but was still gathering the
infrastructure. S. Korea and a few other nations took the work in the meantime.
Meantime, as Sam Francis (RIP) noted in the early nineties, Main Street USA turned into
dollar stores and flea markets and retail dumps and fast food pits.
Yes, nations that make things control the future. They also develop consumer economies.
Thus in a few more years stuff made in China be beyond the price range of the average
American.
Is Covid the most perfect distraction that could have hit the world? The timing couldn't
have been more perfect for the European and American economies. We know that there were major
problems in the financial system back in August-September 2019 when both the ECB and the Fed
declared that they would do what it takes. And since then we have seen massive injections of
liquidity in the form of QE and Repos.
The world was never informed what the financial problems were but it is obvious that this
was the hangover from the 2006-9 financial crisis which was never solved but just deferred with
the help of unlimited money printing and credit expansion. There was clearly something rotten
in the kingdom of the financial world.
So was it just coincidence that Coronavirus started spreading around the world in
January-February this year in the middle of a serious crisis in the financial system?
Throughout history, initiating a crisis has always been a popular remedy that leaders have
applied to divert attention from the real problem whether it be political or financial.
The normal course of action would be a military conflict. This would both enable massive
money printing and also alarming the people which would result in more votes for the ruling
government.
The American writer Henry Louis Mencken understood the purpose of these actions:
I am not someone who subscribes to conspiracy theories. But however the Coronavirus started,
the timing seems more than coincidental. CV has certainly diverted the attention away from the
underlying problems in the financial system and undeniably seems like a hobgoblin. But whether
it is a hobgoblin or not, it has allowed some governments around the world to blame it all on
CV and run huge deficits combined with massive liquidity injections.
The coming likely implosion of the financial system and depression will for decades be
blamed on a pandemic which was only a catalyst and never the cause of the fall of the global
economy. The real cause is a rotten financial system and an unmanageable debt burden which I
have discussed in many articles.
CORONAVIRUS – OUTCOME WORSE WITH AUTOCRATIC
LEADERS
If we look at the effects of CV on various countries the differences are astounding. Sweden
which has had virtually no lockdown saw an 8.6% fall in GDP in Q2. Much of the fall was due to
lower exports as other countries bought less Swedish products. Switzerland which only has had a
very limited lockdown had a 6.4% GDP fall in Q2.
If we then look at the two countries which have totally mismanaged the situation – USA
and UK, the outcome is disastrous. US GDP fell 32.9% in Q2 and the UK GDP was down 20.4%.
(MIS-)MANAGEMENT OF CV
It is clear that the countries that have big ego autocratic leaders have fared the
worst. Sweden and Switzerland have delegated the CV policy to health officials whilst in the US
and UK much of the policy, or lack of, has come from the top.
Sadly the US and the UK have both had high numbers of CV cases and deaths. And in spite of
major lockdowns, these two countries have seen a catastrophic decline in their economies, a
fall which will take many years to recover from.
BEST RUN COUNTRIES HAVE BEST CORONA
RECORD
It is clearly no coincidence that Sweden and Switzerland have strong and well managed
economies also whilst the US and the UK are running big deficits and debts. And with the poor
economic state of the two latter countries, their economies will continue to suffer badly.
Personally I don't believe that there will be an effective vaccine for years or ever.
Historically, any flu vaccine takes years to develop and is only effective in less than 30% of
vaccinated people.
We are also seeing CV coming back in many countries that have lifted the lockdowns like for
example Germany, Spain and France. Therefore it seems very likely that there will not be any
major global recovery in 2021 either.
The biggest dilemma is that CV is not the real cause of the economic downturn but only the
catalyst. As I explained above, the virus has allowed weak countries to print huge amounts of
worthless money to prop up a financial system in an economy which was already on the verge of
imploding before CV started. But fortunately for leaders such as Trump and Johnson they have
been lucky to hide their ailing economies behind the CV curtain. So for them CV has been a very
lucky excuse.
As the US, UK and many economies will be forced to continue or increase government handouts
to suffering people and companies, all these countries' will fall further into the quagmire of
debt, deficits and economic decline.
"... McLaughlin and Associates, a national survey research group requested by Trump to examine the findings, said the results were an effort on the part of "Democratic operatives" to "counter the enthusiasm of Trump voters." Meanwhile, the right-leaning polling agency, Rasmussen, reported that Trump enjoys a 44 percent approval rating, which reflects the usual margin of difference. ..."
"... At the same time, many people must be wondering how Joe Biden, 77, has been able to garner such glowing poll numbers. After all, when the former vice president finally ventured to speak in public after an 88-day disappearing act, it only served to make people question the possibility of his "cognitive decline," a subject the mainstream media seems unwilling to consider in any great depth. ..."
"... Although the United States has certainly suffered from a double whammy of Covid-19 and race riots, the situation does not appear to be as bleak as the media would have everyone believe. In May, for example, analysts expressed disbelief as the economy added 2.5 million jobs, with the unemployment rate declining to 13.3 percent from 14.7 percent. Market watchers had been anticipating a loss of 7.25 million jobs and an unemployment rate of 19.0 percent. Meanwhile, Wall Street continues to weather the storm. ..."
In an era of fake news, can we trust the MSM polls that show Trump badly trailing Biden in the race for the US presidency?
Consult just about any US media resource and a trend is quickly discernible: Donald Trump is sagging in popularity while his likely
Democratic opponent, Joe Biden, soars like an eagle. Are these polls really to be believed?
Is there a conflict of interest greater than that of the US media conducting a public opinion poll on Donald J. Trump?
It appears to be a self-indulgent activity, a bit like climate change activists gathering opinions on the merits of air travel,
for example, or a New York Yankees fan organizing a poll to determine who the best baseball player was, Babe Ruth or David Wright.
In other words, those asking the questions may be very tempted, in deference to their own prejudices, to get the answers they
seek.
Perform a quick Google search on 'Trump poll numbers' and you will likely experience some deja vu. As in 2016, when the media
showed Trump trailing far behind Hillary Clinton, the same media want us to believe that the presidential incumbent is now eating
Joe Biden's dust on the road to the White House.
The New York Times, for example, in an opinion poll it
conducted
in cahoots with ultra-liberal Siena College, showed Biden ahead of Trump by 14 percentage points, pulling 50 percent of the vote
compared with just 36 percent for the president.
In another survey, this one
carried out by USA Today and Suffolk University, Trump garnered 41 percent to Biden's 53 percent. What the poll failed to say,
however, is that in 2016, the editorial board at USA Today took the unprecedented step of taking
sides in that year's presidential race, declaring Trump "unfit for the presidency."
Suffolk University, meanwhile, is situated in snobby Boston, Massachusetts, a formidable Democratic stronghold where Hillary Clinton
secured 60 percent of the 2016 vote compared to Trump's 32.8 percent. No chance of bias there.
Then there was the poll by CNN,
which Trump regularly slams as 'fake news,' where it was said that the incumbent leader was trailing Biden by a whopping 14 points.
The Trump campaign, arguing that just 25 percent of the contacted respondents were Republican, condemned the survey as "defamatory,
and misleading" with the goal of creating "an anti-Trump narrative."
McLaughlin and Associates, a national survey research group requested by Trump to examine the findings,
said the results were an effort on the
part of "Democratic operatives" to "counter the enthusiasm of Trump voters." Meanwhile, the right-leaning polling agency,
Rasmussen, reported
that Trump enjoys a 44 percent approval rating, which reflects the usual margin of difference.
It's important to note that the media, which has a snarling political dog in the Trump-Biden fight, follows up on its dubious
polls with stories based on those very same polls. CNN, for example,
aired a segment that asked, 'What would happen if Trump lost in November but refused to leave office?' Even Fox News, considered
to be 'Trump friendly,' wondered if Trump would drop out of the race due to low poll numbers.
At the same time, many people must be wondering how Joe Biden, 77, has been able to garner such glowing poll numbers. After all,
when the former vice president finally ventured to speak in public after an 88-day disappearing act, it only served to make people
question the possibility of his "cognitive decline,"
a subject the mainstream media seems unwilling to consider in any great depth.
Although the United States has certainly suffered from a double whammy of Covid-19 and race riots, the situation does not
appear to be as bleak as the media would have everyone believe. In May, for example, analysts expressed disbelief as the economy
added 2.5 million jobs, with the unemployment rate declining to 13.3 percent from 14.7 percent. Market watchers had been anticipating
a loss of 7.25 million jobs and an unemployment rate of 19.0 percent. Meanwhile, Wall Street continues to weather the storm.
In short, the country remains resilient in the face of unprecedented challenges, yet Trump's popularity continues to dwindle.
Does the US leader have good reason to question the media-sponsored polls that show him in the basement, exactly where Joe Biden
has been organizing his campaign from for months, or should the American people trust the findings?
Given the way the mainstream media has treated Trump over the course of his first term in office, it seems that whatever the media
reports on the most divisive American president in living memory must be taken with a very generous handful of salt.
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The statements, views and opinions expressed in this column are solely those of the author and do not necessarily represent those
of RT.
Robert Bridge is an American writer and journalist. He is the author of the book, 'Midnight
in the American Empire,' How Corporations and Their Political Servants are Destroying the American Dream.
"... Since the collapse of the Soviet Union, the world has not seen these levels of concentration of ownership. The Soviet Union did not die because of apparent ideological reasons but due to economic bankruptcy caused by its uncompetitive monopolistic economy. Our verdict is that the US is heading in the same direction. ..."
"... In a future instalment of this report, we will show that the oligarchization of America – the placing it under the rule of the One Percent (or perhaps more accurately the 0.1%, if not 0.01%) - has been a deliberate ideologically driven long-term project to establish absolute economic power over the US and its political system and further extend that to involve an absolute global hegemony (the latter project thankfully thwarted by China and Russia). ..."
"... In present-day United States a few major investors – equity funds or private capital - are as a rule cross-owned by each other, forming investor oligopolies, which in turn own the business oligopolies. ..."
"... A study has shown that among a sample of the 1,500 largest US firms (S&P 1500), the probability of one major shareholder holding significant shares in two competing firms had jumped to 90% in 2014, while having been just 16% in 1999. (*2). ..."
"... Institutional investors like BlackRock, Vanguard, State Street, Fidelity, and JP Morgan, now own 80% of all stock in S&P 500 listed companies. The Big Three investors - BlackRock, Vanguard and State Street – alone constitute the largest shareholder in 88% of S&P 500 firms, which roughly correspond to America's 500 largest corporations. (*3). Both BlackRock and Vanguard are among the top five shareholders of almost 70% of America's largest 2,000 publicly traded corporations. (*4). ..."
A close-knit oligarchy controls all major corporations. Monopolization of ownership in US
economy fast approaching Soviet levels
Starting with Ronald Reagan's presidency, the US government willingly decided to ignore the
anti-trust laws so that corporations would have free rein to set up monopolies. With each
successive president the monopolistic concentration of business and shareholding in America has
grown precipitously eventually to reach the monstrous levels of the present day.
Today's level of monopolistic concentration is of such unprecedented levels that we may
without hesitation designate the US economy as a giant oligopoly. From economic power follows
political power, therefore the economic oligopoly translates into a political oligarchy. (It
seems, though, that the transformation has rather gone the other way around, a ferocious set of
oligarchs have consolidated their economic and political power beginning from the turn of the
twentieth century). The conclusion that
the US is an oligarchy finds support in a 2014 by a Princeton University study.
Since the collapse of the Soviet Union, the world has not seen these levels of concentration
of ownership. The Soviet Union did not die because of apparent ideological reasons but due to
economic bankruptcy caused by its uncompetitive monopolistic economy. Our verdict is that the
US is heading in the same direction.
In a later report, we will demonstrate how all sectors of the US economy have fallen prey to
monopolization and how the corporate oligopoly has been set up across the country. This post
essentially serves as an appendix to that future report by providing the shocking details of
the concentration of corporate ownership.
Apart from illustrating the monopolization at the level of shareholding of the major
investors and corporations, we will in a follow-up post take a somewhat closer look at one
particularly fatal aspect of this phenomenon, namely the
consolidation of media (posted simultaneously with the present one) in the hands of
absurdly few oligarch corporations. In there, we will discuss the monopolies of the tech giants
and their ownership concentration together with the traditional media because they rightfully
belong to the same category directly restricting speech and the distribution of opinions in
society.
In a future instalment of this report, we will show that the oligarchization of America
– the placing it under the rule of the One Percent (or perhaps more accurately the 0.1%,
if not 0.01%) - has been a deliberate ideologically driven long-term project to establish
absolute economic power over the US and its political system and further extend that to involve
an absolute global hegemony (the latter project thankfully thwarted by China and Russia). To
achieve these goals, it has been crucial for the oligarchs to control and direct the narrative
on economy and war, on all public discourse on social affairs. By seizing the media, the
oligarchs have created a monstrous propaganda machine, which controls the opinions of the
majority of the US population.
We use the words 'monopoly,' 'monopolies,' and 'monopolization' in a broad sense and subsume
under these concepts all kinds of market dominance be it by one company or two or a small
number of companies, that is, oligopolies. At the end of the analysis, it is not of great
importance how many corporations share in the market dominance, rather what counts is the death
of competition and the position enabling market abuse, either through absolute dominance,
collusion, or by a de facto extinction of normal market competition. Therefore we use the term
'monopolization' to describe the process of reaching a critical level of non-competition on a
market. Correspondingly, we may denote 'monopoly companies' two corporations of a duopoly or
several of an oligopoly.
Horizontal shareholding – the cementation of the
oligarchy
One especially perfidious aspect of this concentration of ownership is that the same few
institutional investors have acquired undisputable control of the leading corporations in
practically all the most important sectors of industry. The situation when one or several
investors own controlling or significant shares of the top corporations in a given industry
(business sector) is referred to as horizontal shareholding . (*1). In present-day United
States a few major investors – equity funds or private capital - are as a rule
cross-owned by each other, forming investor oligopolies, which in turn own the business
oligopolies.
A study has shown that among a sample of the 1,500 largest US firms (S&P 1500), the
probability of one major shareholder holding significant shares in two competing firms had
jumped to 90% in 2014, while having been just 16% in 1999. (*2).
Institutional investors like BlackRock, Vanguard, State Street, Fidelity, and JP Morgan, now
own 80% of all stock in S&P 500 listed companies. The Big Three investors - BlackRock,
Vanguard and State Street – alone constitute the largest shareholder in 88% of S&P
500 firms, which roughly correspond to America's 500 largest corporations. (*3). Both BlackRock
and Vanguard are among the top five shareholders of almost 70% of America's largest 2,000
publicly traded corporations. (*4).
Blackrock had as of 2016 $6.2 trillion worth of assets under management, Vanguard $5.1
trillion, whereas State Street has dropped to a distant third with only $1 trillion in assets.
This compares with a total market capitalization of US stocks according to Russell
3000 of $30 trillion at end of 2017 (From 2016 to 2017, the Big Three has of course also
put on assets).Blackrock and Vanguard would then alone own more than one-third of all US
publicly listed shares.
From an expanded sample that includes the 3,000 largest publicly listed corporations
(Russell 3000 index), institutions owned (2016) about
78% of the equity .
The speed of concentration the US economy in the hands of institutions has been incredible.
Still back in 1950s, their share of the equity was 10%, by 1980 it was 30% after which the
concentration has rapidly grown to the present day approximately 80%. (*5). Another study puts
the present (2016) stock market capitalization held by institutional investors at 70%. (*6).
(The slight difference can possibly be explained by variations in the samples of companies
included).
As a result of taking into account the common ownership at investor level, it emerges that
the US economy is yet much more monopolized than it was previously thought when the focus had
been on the operational business corporation alone detached from their owners. (*7).
The
Oligarch owners assert their control
Apologists for monopolies have argued that the institutional investors who manage passive
capital are passive in their own conduct as shareholders as well. (*8). Even if that would be
true it would come with vastly detrimental consequences for the economy as that would mean that
in effect there would be no shareholder control at all and the corporate executives would
manage the companies exclusively with their own short-term benefits in mind, inevitably leading
to corruption and the loss of the common benefits businesses on a normally functioning
competitive market would bring.
In fact, there seems to have been a period in the US economy – before the rapid
monopolization of the last decade -when such passive investors had relinquished control to the
executives. (*9). But with the emergence of the Big Three investors and the astonishing
concentration of ownership that does not seem to hold water any longer. (*10). In fact, there
need not be any speculation about the matter as the monopolist owners are quite candid about
their ways. For example, BlackRock's CEO Larry Fink sends out
an annual guiding letter to his subject, practically to all the largest firms of the US and
increasingly also Europe and the rest of the West. In his pastoral, the CEO shares his view of
the global conditions affecting business prospects and calls for companies to adjust their
strategies accordingly.
The investor will eventually review the management's strategic plans for compliance with the
guidelines. Effectively, the BlackRock CEO has in this way assumed the role of a giant central
planner, rather like the Gosplan, the central planning agency of the Soviet command
economy.
The 2019 letter (referenced above) contains this striking passage, which should quell all
doubts about the extent to which BlackRock exercises its powers:
"As we seek to build long-term value for our clients through engagement, our aim is not to
micromanage a company's operations. Instead, our primary focus is to ensure board
accountability for creating long-term value. However, a long-term approach should not be
confused with an infinitely patient one. When BlackRock does not see progress despite ongoing
engagement, or companies are insufficiently responsive to our efforts to protect our clients'
long-term economic interests, we do not hesitate to exercise our right to vote against
incumbent directors or misaligned executive compensation."
Considering the striking facts rendered above, we should bear in mind that the establishment
of this virtually absolute oligarch ownership over all the largest corporations of the United
States is a relatively new phenomenon. We should therefore expect that the centralized control
and centralized planning will rapidly grow in extent as the power is asserted and methods are
refined.
Most of the capital of those institutional investors consists of so-called passive capital,
that is, such cases of investments where the investor has no intention of trying to achieve any
kind of control of the companies it invests in, the only motivation being to achieve as high as
possible a yield. In the overwhelming majority of the cases the funds flow into the major
institutional investors, which invest the money at their will in any corporations. The original
investors do not retain any control of the institutional investors, and do not expect it
either. Technically the institutional investors like BlackRock and Vanguard act as fiduciary
asset managers. But here's the rub, while the people who commit their assets to the funds may
be considered as passive investors, the institutional investors who employ those funds are most
certainly not.
Cross-ownership of oligarch corporations
To make matters yet worse, it must be kept in mind that the oligopolistic investors in turn
are frequently cross-owned by each other. (*11). In fact, there is no transparent way of
discovering who in fact controls the major institutional investors.
One of the major institutional investors, Vanguard is ghost owned insofar as it does not
have any owners at all in the traditional sense of the concept. The company claims that it is
owned by the multiple funds that it has itself set up and which it manages. This is how the
company puts it on
their home page : "At Vanguard, there are no outside owners, and therefore, no conflicting
loyalties. The company is owned by its funds, which in turn are owned by their shareholders --
including you, if you're a Vanguard fund investor." At the end of the analysis, it would then
seem that Vanguard is owned by Vanguard itself, certainly nobody should swallow the charade
that those funds stuffed with passive investor money would exercise any ownership control over
the superstructure Vanguard. We therefore assume that there is some group of people (other than
the company directors) that have retained the actual control of Vanguard behind the scenes
(perhaps through one or a few of the funds). In fact, we believe that all three (BlackRock,
State Street and Vanguard) are tightly controlled by a group of US oligarchs (or more widely
transatlantic oligarchs), who prefer not to brandish their power. It is beyond the scope of
this study and our means to investigate this hypothesis, but whatever, it is bad enough that as
a proven fact these three investor corporations wield this control over most of the American
economy. We also know that the three act in concert wherever they hold shares.
(*12).
Now, let's see who are the formal owners of these institutional investors
In considering these ownership charts, please, bear in mind that we have not consistently
examined to what degree the real control of one or another company has been arranged through a
scheme of issuing different classes of shares, where a special class of shares give vastly more
voting rights than the ordinary shares. One source asserts
that 355 of the companies in the Russell index consisting of the 3000 largest corporations
employ such a dual voting-class structure, or 11.8% of all major corporations.
We have mostly relied on www.stockzoa.com for the shareholder data. However, this and
other sources tend to list only the so-called institutional investors while omitting corporate
insiders and other individuals. (We have no idea why such strange practice is employed
IMO NATO should have ended with the fall of the USSR. It now "confronts" a largely
imaginary threat, concocted for the purpose of maintaining the status quo in US government
expenditures for defense and supporting the imperial dreams of the neocons.
Does anyone really think Russia is going to invade the Baltics? Really?
Isn't the western alliance for all intents & purposes already dead?
It is a shame as it could work together to counter the totalitarian CCP. But Mama Merkel
it seems would rather get a few yuan from the communists and turn a blind eye to CCP
authoritarianism until it becomes obvious that the CCP are ruthless and will be competing
with Germany around the world for machine tools and autos by undercutting them on price and
heavily subsidizing their companies until German industry is destroyed.
I have heard of these elusive creatures called "Europeans", but have yet to meet one, so
am not able to comment on their alleged "smug superiority". How many divisions do they
have?
If anything drives the US and Europe apart, it will be trade, not security. Germany is
clearly chafing under the US bit, which sacrifices European industry to US interests --
sanctions on Nordstream 2, trade with Russia, trade with Iran, and China and Huawei. The US
clearly prioritizes it's own LNG , finance, technology and arms industries over European
prosperity. It amazes me that it has taken Europe so long to wake up.
Biden will do nothing to change that dynamic, since he is beholden to the same interests
as Trump.
Does anyone really think Russia is going to invade the Baltics? The Baltics and most
likely the Poles do with past history in mind. I would like to see them and the Ukrainians
transition into something like the Finns who acknowledge Russian power but maintain their
independence. Right now they are looking at NATO as their guarantee of independence in the
future. Who can blame them when looking at history.
The Trump admin's (and for that matter, Trump's own instincts) are and have continuously
been quite correct with regards to EU's defense expenditures agenda. The European 'humanists'
take advantage of the American defense umbrella inside their own countries so they can afford
to NOT spend on defense and instead spend more on domestic and economic development. So while
America continues to pay for the EU's defense it cannot afford to invest in its own domestic
programs (infrastructure, etc.) adequately. These Europeans then with the collaboration of
their Atlanticist fellows on the other side of the pond do nation-building and
democratization projects (call it endless wars) abroad, such as in Afghanistan. Just don't
ask them about their track record in this department.
However, the thing is when their immediate interests are in danger they forget about
America in a heartbeat. Examples, Germany's Nordstream pipeline with Russia, 5G
infrastructure and development, trade with China, Paris climate accord, etc.
I tend to believe that EU knows best how to make an existential threat out of Russia.
Anyone still remembers the novichok incident back in 2018? The thing with Russia is that from
the POV of EU, they view their Eastern neighbor as a solid and stable illiberal system that
is not within the ideological orbit of the western liberal democracy and thus they feel
threatened by that ideologically, NOT a scenario in which from Tallinn to Toulouse is invaded
and captured by Putin. In this endeavor they also have found willing partners in
'anti-authoritarian' hawks such as Bob Kagan, Hilary, Sam Power et.al that tow the same line
and advocate for NATO expansion and other similar projects.
The EU in definitely terrified of a scenario in which the U.S. (under a nationalist
conservative administration) starts de-funding NATO or withdraws its troops from Europe. In
this case they need to cut public spending and allocate more on defense which has a clear
impact on the 'democratic spirit' of EU's over-hyped social democracy.
In the past few years we have seen the rise of right-wing populsit nationalist parties in
pretty much every single major EU country. I believe there are strong tendencies in the Trump
admin-if DJT manages to stay in power for another 4 years- to do a little *something
something* about EU's decades-long nefarious free-riding of U.S. defense umbrella and I don't
think the effeminate EU leaders will gonna like it very much.
Barbara Ann - You say "I have heard of these elusive creatures called "Europeans", but
have yet to meet one, so am not able to comment on their alleged "smug superiority". How many
divisions do they have?"
The term "European" has become disputed territory. As an Englishman I regard myself fully
as "European" as any German or Frenchman but for many the term now seems to mean exclusively
"Member of the European Union". Tricky, that one.
Me, I prefer the term "Westerner". It takes in the so-called "Anglosphere" as well and
therefore covers all the ground without going into the fact that some parts have become
considerably less powerful over the last century and others considerably more. Also
accommodates without fuss the fact that the cultural centre of gravity, at some indeterminate
time in that last century, moved across from Paris, Vienna and Berlin to New York and parts
west.
Not always to your advantage, to you as an American that is, because a fair chunk of the
Frankfurt mob moved over your way with it. You caught from Old Europe the destructive and
vacuous tenets of "Progressivism" and are now sharing the disease in its full vigour with
us.
I mention that last because the violent TDS you see across the Atlantic isn't specifically
European. It's merely that it's natural for progressives to detest Trump or rather, not the
man himself but the "populist" forces he is taken to represent. It's garlic to the vampire
for the progressive, the Little House on the Prairie or its various European equivalents, and
the allergic reaction will become stronger yet. That "smug superiority" you will therefore
find in the States as readily as you will find it here. America or here we live on sufferance
in occupied territory, if we are not progressives ourselves, and should not the occupiers
always be superior and smug?
I went hunting for the Telegraph article the Colonel discusses above. I didn't like that
article at all. It gets the "freeloading" part right but in the context of a Russophobia
that's seemingly set in stone. And the Telegraph is not so much a progressive newspaper as
one that, while throwing a few token bones to its mainly Conservative readership, buys the
progressive Weltanschauung just as much as the Guardian or New York Times.
"How many divisions do they have?" A few more than the pope but maybe that's not
the point. I recently tried to follow the twists and turns of Mrs May's negotiations with the
EU as they related to defence. I got the impression that in the matter of defence the supply
of divisions could safely be left to the Americans. It was the allocation of defence
contracts that they were all concerned about.
Residing in Europe in the late 1960's at a US joint NATO military attachment in Northern
Italy, we mused were we there to keep our eye on the Russians, or in fact keep our eyes on
the Germans. One still saw in the back rooms, AXIS memorabilia.
As an aside: the only reason Michelle Obama chose as one of her FLOTUS projects - support
of military families -- was so she could get Uncle Sam to jet her around to all those US
military bases still in Europe for tea with the commander's wife and then on to her real
purpose - shopping and having fun with friends and families she was able to drag along. On
our dime.
My last visit to Europe found there are now more Turks, than former "Europeans; except in
France where they were more Algerians, than native French. And of course UK has long been
little more than the entrenched polyglot of their vast far flung Empire.
Indeed, who is a "European" today. Birth rate demographics from the former colonies, boat
people or import of cheap labor has now taken over anything we used to call "European". Can a
resident Turk really serve up a perfect plate of raclette in Switzerland? One word answer:
no. And that is a sad loss. One must instead shift their tastes to shwarma, if one wants
European food today.
In regard to Europeans--and perhaps some Australians whom I've met--I have often felt that
they in some ways did feel a bit superior to Americans.
Their sense of superiority, however, seemed more rooted in a sense of cultural
superiority. Those on the blog who viewed the comic rendition of the Three Little Pigs that
was recently posted here might think of that and its wonderful ending about the house that
was "American made." it was a wonderful ending for that well-known tale and a great defense
of our culture's current limited and plain vocabulary in some groups.
As an English major and English teacher, so much of the great literature that we taught
did come from England. I took three Comps when I earned my Masters: English literature from
Beowulf (which I read in Old English) to Chaucer's Catterbury Tales (which I read in Middle
English) and then to Virginia Woolf.
For my comp in American literature, I read from Washington Irving to the modern American
writers at the time I was in college.
My third comp was in Modern Linguistic Theory.
Of course we taught Shakespeare and Dickens---English writers--to our junior high and high
school classes. We studied mostly American writers in regard to short stories, as short
stories are considered the American genre. Our teaching of poetry covered both English and
American poets. As far as novels go, we taught both English and American novels.
Russian and German novelists were also on our list of reading for our comps. (We read them
in English translation.)
In summary, American culture was often overshadowed by the many longer centureies of
European culture in much of my college career.
What the Europeans can't deny, though they may want to, is that the tehcology and
innovation in things like automobile production, electricity, telephones, and into space
expoloration ---many things like that--is where we can indeed be quite proud.
They can continue to feel culturally superior to us if it makes them feel better. I defy
them, however, to minimize our importance in World War II.
A European was understood, in Iran, to be a Christian. A Turk in Germany or and Algerian
in France is just that, a Turk, an Algerian, i.e. another Muslim.
There are professional and managerial middle class French Muslims in Paris and elsewhere,
but are they French? I do not know how assimilated they are.
" he will follow some Trump-era objectives, because that is what American interests
demand, thus showing that Trump was no extremist on China."
So if Biden and Trump both want something, that shows that it isn't extreme. How does that
work again?
The drive for confrontation with Russia contradicts Europe's desire to do buisness with her.
Hence the end of the Western Alliance.
"The US faces a rapidly escalating political crisis. The losing party in November will
undoubtedly go to the federal courts to claim that their opponents cheated in the
process."
They all went along with electronic voting and postal ballots. Now they're all going to
complain about the consequences.
Of course NATO should have disappeared together with the Berlin Wall, but it is alive,
kicking and ever looking for trouble, Belarus comes to mind.
The problem with propaganda is that the emitter ends up believing it, Europe does not need
any protection, we have the means to protect ourselves.
The US is an occupation force, and on top of it demands payment for it. Pick up your gear and
go home, and by the way, Europe should worry about countries armed to their teeth by the US,
I'm thinking about Morocco for instance, since I live in Spain. The beautiful line of the
Sierra that I contemplate every morning while stretching has been contaminated with a radar
station of the Aegis system, and that means we in our quite and beautiful Andalusian town are
a target for the biggies. Stop believing your propaganda, pick up your gear and let everybody
take care of themselves, the benefits will be for the US population in the first place, and
the world will rejoice.
The reason German military contribution to the "western alliance" is what it is is very
simple.
It is according to the incentives that threats that German leadership perceives.
First: Objective strategic things:
Essentially, noone is going to invade Germany. This removes one major reason to have a large
army. Secondly, Germany is not going to productively (in terms of return of investment)
invade anyone else. This removes the second major reason to have a large army. There is
something to be said to have a cadre army that can be surged into a real army if conditions
change.
Second: Incentives of German political leaders.
While the degree of German vassal stateness concerning the USA is up to a degree of debate,
that the USA has a lot of influence over Germany is in my view not. Schröder got elite
regime changed over his Iraq war opposition (it was amazing that literally all the newspaper
were against him, had a big impact on me growing up during this time).
Essentially, if you are in Nato, at some point, Uncle Sam will invite you to some adventure.
If you say yes to this adventure you commit your armed forces to some confrontation in the
middle east if you are lucky, or against Russia in Eastern Europe if you are unlucky. Your
population is not going to like this, and you may face losing elections over this. It is also
expensive in terms of life and material (although not very expensive compared to actual wars
against competent enemies).
If you say no, Uncle Sam will be displeased with you and will make this known for example by
sicking the entire "Transatlantic leadership networks" on you, which can also make you lose
the next election.
Essentially, if Uncle Sam comes asking, you lose the next election if you say yes, and you
also lose if you say no. Saying no is on balance cheaper, because you dont incurr the
financial and human costs of joing a random US adventure on top of the risk of losing the
next election.
The winning play is to get your army in such a state that Uncle Sam will not even ask.
Germany basically did create condition that enabled this.
Its a reasonably happy state for Germany to be in.
We are basically doing Brave Soldier Schweijk on the national level.
Solutions from a US pov:
1: Do less military adventures. If you do less adventures, people will fear being
shanghaied along less. This will decrease the drawbacks associated with having a reasonable
military as a Nato state.
2: Dont soft regime change governments that say no to your foreign adventures. Instead,
maybe listen to them. Had the US listend to French and German criticism regarding the wisdom
of going to war with Iraq, the US and also a lot of others would have been much better
off.
3: Make it clear that particpation in foreign adventures is actually voluntary instead of
"voluntary", make also clear that participation in defensive operations is not voluntary and
is what Nato was created for and that you expect a considerable contribution towards this.
Also, do some actual exercises. For example, if Germany claims that its military expenditure
is sufficient, stress test this premise by having a realistic exercise in which a German
divisions goes up against an American one. Yes, do some division size exercizes pretty
please. Heck, after ensuring that this exercize wont be a failfest, have some Indian be the
referee.
Now we are getting to the heart of the matter. My jest about never having met a European
was of course designed to illustrate that "Europe" is a secondary construct. Never has a
person, upon meeting me, introduced themselves as a "European".
Europe is a moveable feast and even territorial definitions are slippery. "Europeans" I
think, must be characterized by short memories, for was it not less than 25 years ago that
European NATO planes bombed their fellow Europeans in Bosnia? It can't have been an accident
either, as I understand the op. was called "Operation Deliberate Force".
If Europe is synonymous with the EU it has precisely zero divisions and though you
yourself may remain "Western", you are as a consequence of Brexit no longer "European". No, I
think you and Polish Janitor are close by identifying "European" as a progressive/liberal,
democratic (read "globalist") value system. An insufficiency of "European-ness" can thus be
used to justify NATO involvement across various geographies - from Bosnia to Afghanistan
(& shortly Belarus?).
But of course the "European" members of NATO are hardly on the same page. It looks not at
all unlikely that two of its members may go to war in the Eastern Mediterranean.
I agree with you re the Telegraph article btw. "European" smugness is well represented in
that organ.
No. They did NOT all go along with "electronic voting and postal ballots." The 50 states
each run federal elections in any way they please. The US Constitution requires that. There
are a wide variety of voting machines in use and only a few states use mailed in ballots. the
Republican Party particularly opposes mail in voting.
You should be complaining to the politicians you elect. They're the ones requesting US
military protection. Prior to Trump, our governments were quite happy to provide that
protection. He's now asking for some cost sharing.
Be careful though, before you know it Spain could become a vassal of the Chinese
communists as many countries in Africa are finding out now. Hopefully you can continue to
extract euros from the Germans and Dutch while battling the separatists in Catalonia. There's
a thin veneer between stability & strife.
Paco, with a huge cost of lives and treasure the US was twice asked to clean up Europe's
self-inflicted messes in the past century. Promise you won't call on us again, and we can
talk. I know, past is not necessarily prologue but do at least meet us half way. It is only
good manners.
Barbara Ann - Lots of Europes of course. "My" Europe may no longer be on the active list.
Traces here and there. Few green shoots that are visible to me. Many rank growths overlaying
it.
Also many "European Unions". They exist all right, in uneasy company.
So many "EU's". A ramshackle Northern European trading empire - I think that's too
unstable to be long for this world but I could be wrong. A nascent superpower, that denied by
many but for some their central aim.
A bureaucratic growth. A handy market place for all. A Holocaust memorial centre; when the
EU politicians find themselves in a tight spot they can always call on Auschwitz and all fall
back in line. I saw Mrs Merkel pull that trick at the last but one Munich Security Conference
and all there, because Mrs Merkel was at that time in a very tight spot, applauded with
relief.
A Progressive Shangri-La, all the more enticing for never being defined. Those adherents
of that "EU" do actually call themselves "EU citizens" and I see the term is becoming more
common usage. Maybe those are the self proclaimed "European citizens" you have not met.
And the producer of reams of lifeless prescription that seek to force all into the same
mould and tough on the poor devils who can't fit the model. And on their families.
Lots of "EU's". I like none of them. While we wait for that edifice of delusion to
collapse I hope the damage it does to "My" Europe is not irreparable.
@ Diana Croissant: "They can continue to feel culturally superior to us if it makes
them feel better. I defy them, however, to minimize our importance in World War II."
Jack, with all due respect, the politician who committed treason and gave away Spanish
territory for a foreign power to install bases died in 1975, nobody voted for him, general
Franco, an ally of Hitler, someone who sent over 50k troops to the siege of Leningrad, one of
the greatest crimes in the history of mankind, a million casualties, mainly civilians, dead
by hunger and disease, that fascist ally of Hitler we had to endure for 40 years, the price
to close your eyes and your nose not to smell the stench were bases, an occupying force
watching one of the strategic straights in Rota, close to Gibraltar, plus other bases inland.
I could go on, and remind you of 4H bombs dropped over Palomares after a broken arrow
incident, one of them broke and plutonium is still poisoning an area that your government is
not willing to clean. So that is what foreign occupation looks like, if something goes wrong,
well, we are protecting you . they say. History should be taught with a bit more detail in
the USA.
I'm afraid you're reading the dynamics of the European/US relationship quite incorrectly.
Bluntly, you have the facts wrong.
This site, and particularly the Colonel's committee of correspondence, is packed with
experts who have lived in this field and know their way around it. So I don't venture a
comprehensive rebuttal myself - my knowledge is partial and I do not have the background to
be sure of getting it dead right. But here -
"Essentially, if you are in Nato, at some point, Uncle Sam will invite you to some
adventure. If you say yes to this adventure you commit your armed forces to some
confrontation in the middle east if you are lucky, or against Russia in Eastern Europe if you
are unlucky."
That is transparent nonsense.
Obama has stated that it was the Europeans, including the UK, who pushed him into some
middle East interventions. I don't think he was shooting a line. The leaked Blumenthal emails
confirm that and we merely have to look at the thrust of French military actions to
understand that the French in particular push continually for intervention in the ME.
They are still doing so, and not for R2P purposes. They would see the ME and parts of
Africa as part of the EU sphere of influence and their initial reaction to Trump's abortive
attempt to withdraw from Syria shows they would be more than prepared to go it alone there if
they could.
A squalid bunch, and here I must include my own country in that verdict. Reliant on US
logistics and military strength they seek to pursue their own interests and could they but do
so they would do so unassisted. Don't pretend that it's the Americans who force them into
these genocidal adventures.
As for the Ukraine, we see from Sakwa's unflattering study of the EU adventure there that
that was building up well before 2014. The dramatic rejection of the EU deal was the prelude
to the coup. The Ashton tape shows an astonishing degree of EU intervention in Ukrainian
internal affairs before that coup. And from the Nuland tape we get a glimpse of the EU regime
change project that shows it was deeply implicated.
Pushed into the Ukrainian adventure by the US? Rubbish. The EU and its constituent members
were attempting to play their own hand and were not merely following the US lead
submissively.
We hear little of European neocon ventures. But what little has surfaced about them shows
that your picture of peace loving Europeans dragged into these conflicts by an overbearing
"Uncle Sam" is dishonest and misleading.
So I tell my German friends and relatives when they push the same line. They look at me
with disbelief and go off and hunt around the internet themselves. And then come back and do
not disagree. I suggest you do the same. The facts are all there, even for those of us
without inside knowledge or who lack the requisite background.
When I lived in Europe it seemed like all the post offices had banks which offered basic
services like checking and savings. They should do that here.
seryanhoj , 2 hours ago
They have a simple ' people's ' banking system for people that don't feel up to going to
to one if the majors, and probably deal in small smounts.
The same system handles distributions from the various social schemes. Also they give low
or no cost access to buy government securities, and savings schemes. It sound a bit 'Big
Brover' , but in practice it feels good.
Demeter55 , 46 minutes ago
You are threatening the banksters! They need every last penny!
Russia-China "Dedollarization" Reaches "Breakthrough Moment" As Countries Ditch Greenback
For Bilateral Trade by Tyler Durden Thu, 08/06/2020 - 21:55
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Late last year, data released by the PBOC and the Russian Central Bank shone a light on a
disturbing - at least, for the US - trend: As the Trump Administration ratcheted up sanctions
pressure on Russia and China, both countries and their central banks have substantially
"diversified" their foreign-currency reserves, dumping dollars and buying up gold and each
other's currencies.
Back in September, we wrote about the PBOC and RCB building their reserves of gold bullion
to levels not seen in years. The Russian Central Bank became one of the world's largest buyers
of bullion last year (at least among the world's central banks). At the time, we also
introduced this chart.
We've been writing about the impending demise of the greenback for years now, and of course
we're not alone. Some well-regarded economists have theorized that the fall of the greenback
could be a good thing for humanity - it could open the door to a multi-currency basket, or
better yet, a global current (bitcoin perhaps?) - by allowing us to transition to a global
monetary system with with less endemic instability.
Though, to be sure, the greenback is hardly the first "global currency".
Falling confidence in the greenback has been masked by the Fed's aggressive buying, as
central bankers in the Eccles Building now fear that the asset bubbles they've blown are big
enough to harm the real economy, so we must wait for exactly the right time to let the air out
of these bubbles so they don't ruin people's lives and upset the global economic apple cart. As
the coronavirus outbreak has taught us, that time may never come.
But all the while, Russia and China have been quietly weening off of the dollar, and instead
using rubles and yuan to settle transnational trade.
Since we live in a world where commerce is directed by the whims of the free market (at
least, in theory), the Kremlin can just make Russian and Chinese companies substitute yuan and
rubles for dollars with the flip of a switch:
as Russian President Vladimir Putin once exclaimed , the US's aggressive sanctions policy
risks destroying the dollar's reserve status by forcing more companies from Russia and China to
search for alternatives to transacting in dollars, if for no other reason than to keep costs
down (international economic sanctions can make moving money abroad difficult).
In 2019, Putin gleefully revealed that Russia had reduced the dollar holdings of its central
bank by $101 billion, cutting the total in half.
And according to new data from the Russian Central Bank and Federal Customs Service, the
dollar's share of bilateral trade between Russia and China fell below 50% for the first time in
modern history.
Businesses only used the greenback for roughly 46% of settlements between the two countries.
Over the same period, the euro constituted an all-time high of 30%. While other national
currencies accounted for 24%, also a new high.
As one 'expert' told the Nikkei Asian Review, it's just the latest sign that Russia and
China are forming a "de-dollarization alliance" to diminish the economic heft of Washington's
sanctions powers, and its de facto control of SWIFT, the primary inter-bank messaging service
via which banks move money from country to country.
The shift is happening much more quickly than the US probably expected. As recently as 2015,
more than 90% of bilateral trade between China and Russia was conducted in dollars.
Alexey Maslov, director of the Institute of Far Eastern Studies at the Russian Academy of
Sciences, told the Nikkei Asian Review that the Russia-China "dedollarization" was
approaching a "breakthrough moment" that could elevate their relationship to a de facto
alliance.
"The collaboration between Russia and China in the financial sphere tells us that they are
finally finding the parameters for a new alliance with each other," he said. "Many expected
that this would be a military alliance or a trading alliance, but now the alliance is moving
more in the banking and financial direction, and that is what can guarantee independence for
both countries."
Dedollarization has been a priority for Russia and China since 2014, when they began
expanding economic cooperation following Moscow's estrangement from the West over its
annexation of Crimea. Replacing the dollar in trade settlements became a necessity to
sidestep U.S. sanctions against Russia.
"Any wire transaction that takes place in the world involving U.S. dollars is at some
point cleared through a U.S. bank," explained Dmitry Dolgin, ING Bank's chief economist for
Russia. "That means that the U.S. government can tell that bank to freeze certain
transactions."
The process gained further momentum after the Donald Trump administration imposed tariffs on
hundreds of billions of dollars worth of Chinese goods. Whereas previously Moscow had taken
the initiative on dedollarization, Beijing came to view it as critical, too.
"Only very recently did the Chinese state and major economic entities begin to feel that
they might end up in a similar situation as our Russian counterparts: being the target of the
sanctions and potentially even getting shut out of the SWIFT system," said Zhang Xin, a
research fellow at the Center for Russian Studies at Shanghai's East China Normal
University.
As commentators focus on the hospitalisations of two Gulf monarchs, and permutate likely
succession issues, they may miss the wood for the succession trees: Of course, the death of
either the Emir of Kuwait (91 years old) or King Salman of Saudi Arabia (84 years old) is a
serious political matter. King Salman's particularly has the potential to upturn the region (or
not). Yet Gulf stability today rests less on who succeeds, but rather on tectonic shifts in
geo-finance and politics that are just becoming visible. Time to move on from stale ruminations
about who's 'up and coming', and who's 'down and out' in these dysfunctional families.
The stark fact is that Gulf stability rests on selling enough energy to buy-off internal
discontents, and to pay for supersized surveillance and security set-ups.
For the moment, times are hard, but the States' financial 'cushions' are just about
holding-up (albeit only for the big three: Saudi Arabia, Abu Dhabi and Qatar). For others the
situation is dire. The question is, will this present status quo persist? This is where the
warnings of shifts in certain global tectonic plates becomes salient.
The Kuwaiti succession struggle is emblematic of the Gulf rift: One candidate for Emir, (the
brother), stands with Saudi Arabia and its Wahhabi-led 'war' on Sunni Islamists (the Muslim
Brotherhood). Whereas the other, (the eldest son), is actively backed by the Muslim
Brotherhood, Qatar and Turkey. Thus, Kuwait sits on firmly on the Gulf abyss – a region
with significant, but disempowered Shi'a minorities, and a Sunni camp divided and 'at war' with
itself over support for the Muslim Brotherhood; or what is (politely called) 'autocratic
secular stability'.
Interesting though this is, is this really still so relevant?
The Gulf, perhaps more significantly, is held hostage to two huge financial bubbles. The
real risk to these States may prove to come from these bubbles, which are the very devil to
prick-down into any gentle, expelling of gas. They are sustained by mass psychology –
which can pivot on a dime – and usually end catastrophically in a market 'tantrum', or a
'bust' – and with consequent risk of depression, should Central Banks ever try to lift
the foot off the monetary accelerator.
The U.S. ubiquitous 'asset bubble' is famous. Central Bankers have been worrying about it
for years. And the Fed is throwing money at it – with abandon – to keep it from
popping. But as indicated earlier, such bubbles are highly vulnerable to psychology – and
that may be turning, as the celebrated V-shaped, expected economic recovery recedes into the
virus-induced distance. But for now, investors believe that the Fed daren't let it implode
– that the Fed has absolutely no option but go on throwing more and more money at it (at
least until November elections & then what?).
Less visible is that other vast 'asset bubble': The Chinese domestic property market. With
its closed capital account, China has a huge sum (some $40 trillion) sloshing around in
collective bank accounts. That money can't go abroad (at least legally), so it rotates around
between three asset markets: apartments, stocks, and commodities somewhat whimsically. But
investing in apartments is absolutely king! 96%
of urban Chinese own more than one: 75% of private wealth is represented by investments in
condos – albeit with 21% standing empty in urban China, for lack of a tenant.
Long story, short, the Chinese massively chase property valuations. Indeed, as the WSJ has
noted "the central problem in China is that buyers have figured out the government doesn't
appear to be willing to let the market fall. If home prices did drop significantly, it would
wipe out most citizens' primary source of wealth, and potentially trigger unrest". Even during
the pandemic – or, perhaps because of it as the Chinese piled-in – prices rose 4.9%
in June, year on year. The total
value of Chinese homes and developers' inventory hit $52 trillion in 2019, according to
Goldman Sachs; i.e. twice the size of the U.S. residential market, and outstripping even the
entire U.S. bond market.
If it sounds just like America's QE-inflated asset markets, that's because it is. As things
stand, both the Chinese residential and the U.S. equity bubbles are unstable. Which might
fracture fist? Who knows but bubbles are also vulnerable to pop on geo-political events (such
as a U.S. naval landing on one of China's disputed South Sea islands, to which
China is promising , absolutely, a military response).
No one has any idea how Chinese officials can manage the property bubble, without
destabilizing the broader economy. And even should the market stay strong, it creates headaches
for policy makers, who have had to hold off on more aggressive economic stimulus this year
– which some analysts say is needed, partly because of fears it will inflate
housing further.
Ah there it is: Out in plain view – the risk. The condo-trade has hijacked the entire
Chinese economy, tying officials' hands. This, at the moment when Trump's trade war has turned
into a new ideological cold war targeting the Chinese Communist Party. What if the Chinese
economy, under further U.S. sanctions, slides further, or if Covid 19 resurges (as it is in
Hong Kong)? Will then the housing market break, causing recession or depression? It is, after
all, China and Asia that buy the bulk of Gulf energy: Demand shrinks, and price falls. The fate
of the Gulf States' economies – and stability – is tied to these mega-bubbles not
popping.
Bubbles are one factor, but there are also signs of the tectonic plates drifting apart in a
different way, but no less threatening. Bankers Goldman Sachs sits at the very heart of the
western financial system – and incidentally staffs much of Team Trump, as well as the
Federal Reserve.
And Goldman wrote something this week that one might not expect from such a system stalwart:
Its commodity strategist Jeffrey Currie,
wrote that "real concerns around the longevity of the U.S. dollar as a reserve currency
have started to emerge".
What? Goldman says the dollar might lose its reserve currency status. Unthinkable? Well that
would be the standard view. Dollar hegemony and sanctions have long been seen as Washington's
stranglehold on the world through which to preserve U.S. primacy. America's 'hidden war', as it
were. Trump clearly views the dollar as the bludgeon that can make America Great Again.
Furthermore, as Trump and Mnuchin – and now Congress – have taken control of the
Treasury arsenal, the roll-out of new sanctions bludgeoning has turned into a deluge.
But there has also been within certain U.S. circles, a contrarian view. Which is that the
U.S. needs to 're-boot' its economic model with a Tech-led, 'supply-side' miracle to end growth
stagnation. Too much debt suffocates an economy, and populates it with zombie enterprises.
In 2014, Jared Bernstein, Obama's former chief economist said that the U.S. Dollar
must
lose its reserve status , if such a re-boot were to be done. He explained why, in a New
York Times op-ed:
"There are few truisms about the world economy, but for decades, one has been the role of
the United States dollar as the world's reserve currency. It's a core principle of American
economic policy. After all, who wouldn't want their currency to be the one that foreign banks
and governments want to hold in reserve?
"But new research reveals that what was once a privilege is now a burden, undermining job
growth, pumping up budget and trade deficits and inflating financial bubbles. To get the
American economy on track, the government needs to drop its commitment to maintaining the
dollar's reserve-currency status."
In essence, this is the Davos Great Reset line
. Christine Lagarde, in the same year, called too for a 'reset' (or re-boot) of monetary policy
(in the face of "bubbles growing here and there) – and to deal with stagnant growth and
unemployment. And this week, the U.S. Council on Foreign Relations issued a paper entitled:
It
is Time to Abandon Dollar Hegemony .
That, we repeat, is the globalist line. The CFR has been a progenitor of both the European
and Davos projects. It is not Trump's. He is fighting to keep America as the seat of western
power, and not to accede that role to Merkel's European project – or to China.
So why would Goldman Sachs say such a thing? Attend carefully to Goldman's framing: It is
not the Davos line. Instead, Currie writes that the soaring disconnect between spiking gold
price and a weakening dollar "is being driven by a potential shift in the U.S. Fed towards an
inflationary bias, against a backdrop of rising geopolitical tensions, elevated U.S. domestic
political and social uncertainty, and a growing second wave of covid-19 related
infections".
Translation: It is about U.S. explosive debt accumulation, on account of the Coronavirus
lockdown. In a world where there is already over $100 trillion in dollar-denominated debt, on
which the U.S. cannot default; nor will it ever be repaid. It can therefore only be inflated
away. That is to say the debt can only be managed through debasing the currency. (Debt jubilees
are viewed as beyond the pale.)
That is to say, Goldman's man says dollar debasement is firmly on the Fed agenda. And that
means that "real concerns around the longevity of the U.S. dollar as a reserve currency, have
started to emerge".
It is a nuanced message: It hints that the monetary experiment, which began in 1971, is
ending. Currie is telling U.S. that the U.S. is no longer able to manage an economy with this
much debt – simply by printing new currency, and with its hands tied on other options.
The debt situation already is unprecedented – and the pandemic is accelerating the
process.
In short, things are starting to spin out of control, which is not the same as advocating a
re-boot. And the debasement of money is inevitable. That's why Currie points to the disconnect
between the gold price (which usually governments like to repress), and a weakening dollar. If
it is out of the Fed's control, it is ultimately (post-November) out of Trump's hands, too.
Should confidence in the dollar begin to evaporate, all fiat currencies will sink in tandem
– as G20 Central Banks are bound by the same policies as the U.S.. China's situation is
complicated. It would in one way be harmed by dollar debasement, but in another way, a general
debasement of fiat currency would offer China and Russia the crisis (i.e. the opportunity), to
escape the dollar's knee pressed onto their throats.
And for Gulf States? The slump in oil prices this year already has prompted some investors
to bet against Gulf nations' currencies, putting longstanding currency pegs with the dollar
under pressure. GCC states have kept their currencies glued to the dollar since the 1970s, but
low oil demand, combined with dollar weakness would exacerbate the threat to Gulf 'pegs', as
their trade deficits blow out. Were a peg to break, it is not clear there would be any obvious
floor to that currency, in present circumstances.
Against such a backdrop, the royal successions underway in Gulf States might perhaps be
regarded a sideshow.
The mafia methods used are often packaged as monopoly powers such copyrights, patents,
transformation of public goods into for profit private enterprizes (privatization), takeovers and
bankruptcy, private ownership of the highest levels of nearly all governments, and just 6 own 92%
of all media.
Takeover of Tik Toc by Microsoft is just one demonstrating of a wider trend -- the tend
toward gangster capitalism. BTW Chinese proposes complete divestment. That spells big trouble for
US heavyweights such as Amazon, Google and Facebook.
"We lie to deceive ourselves, we lie to comfort others, we lie out of pity, we lie out of
shame, to encourage, to hide our misery, we lie out of honesty. We lie for freedom."
Trump blames China every chance he can and the Democrats either agree or offer mealy-mouthed
protest.
Notable quotes:
"... It comes to light that at least 125 US companies owned or invested in by Chinese entities, including Chinese SOE, received hundreds of millions in PPP loans backed by the US SBS. ..."
"... This level of capitalust interconnection between elite investors and governments belies all the heated talk of cold war by politicians on both sides as well as useful idiots the world over. ..."
"... "If this is also national security, then US national security is synonymous with hegemony." ..."
China has never banned US high-tech companies from doing business in the country. What the
Chinese government demands is that what they do in China should comply with Chinese law.
That's all . It was some US companies that refused to comply with Chinese laws.
Google used to have a position in the Chinese market. It itself pulled out of China a
decade ago, while other companies were accused in the US of kowtowing to China when they
tried to design their specific versions for the Chinese market. This leaves no US internet
giant currently operating in China.
TikTok operates in the US in full compliance with US laws and is completely cut off from
Douyin, its Chinese equivalent. Users in the Chinese mainland cannot register for TikTok
even if they bypass the so-called great firewall . TikTok does not violate any US
law but fully cooperates with the US administration.
The US claim that TikTok threatens its own national security is a purely hypothetical
and unwarranted charge - just like the groundless accusation that Huawei gathers
intelligence for the Chinese government. This is fundamentally different from China's
refusal to allow the original versions of Facebook and Twitter to enter China and require
them to operate in accordance with Chinese laws.
In just three paragraphs, the Global Times killed two myths: that a "great firewall"
exists and that China censorship things from the West (i.e. that the Chinese people is
"living in the darkness").
I had a teacher who traveled to China recently. He went to a local bar (100% Mainland
Chinese) as soon as he landed. He was having difficulty accessing Google (I think it was
either Gmail or Google Drive). He tried, tried, tried but couldn't do it. When the locals
there realized he was trying to access Google products, they promptly and calmly told him he
should use VPN because Google didn't operate in China. No drama, no fear of a local police
officer suddenly coming to the place to arrest them.
They know what Apple, Google and Facebook are. It's just that China has better local
options for the same product.
Not that globalization is a one way street by any means.
It comes to light that at least 125 US companies owned or invested in by Chinese entities,
including Chinese SOE, received hundreds of millions in PPP loans backed by the US SBS.
This level of capitalust interconnection between elite investors and governments belies
all the heated talk of cold war by politicians on both sides as well as useful idiots the
world over.
Why even favorite Chinese PR flack Pepe Escobar recently characterized the Stupidity Trap
aka Thucydides Trap as childish nonsense.
"If this is also national security, then US national security is synonymous with
hegemony."
That is precisely the problem. Unfortunately, the current US economy has become dependent on
advantages arising from unrivaled geopolitical power. Take it away too suddenly, and there
would be a painful economic transition to become a normal nation again.
"... Case in point, reporting today on the newly disclosed Ghisline Maxwell documents only mentioned Prince Andrew and not a word about Bill Clinton ..."
"... believe James Murdoch was part of the "we are all gonna die in <11 years" Green New Deal school of thought. ..."
"James Murdoch, the younger son of media mogul Rupert Murdoch, has resigned from the board
of News Corporation citing "disagreements over editorial content".
In a filing to US regulators, he said he also disagreed with some "strategic decisions" made
by the company.
The exact nature of the disagreements was not detailed.
... ... ..,
I watch a lot of TeeVee news on all the major networks including the two Foxnews
channels.
It has become apparent to me over the last year or so that there is an internal ideology
contest at Fox between the hard core conservatives like Dobbs. Carlson, Mark Levin, Bartiromo,
Degan McDowell, etc. and a much more liberal set of people like Chris Wallace, Cavuto and the
newer reporters at the White House. I expect that the departure of James Murdoch will result in
more uniformly conservative reporting and commentary on Fox. I say that presuming that James
Murdoch was a major force in trying to push Foxnews toward the left.
I am surprised that Murdoch sent his son to Harvard. pl
Been noticing a lot of irresponsible reporting of late in the WSJ - not on the opinion
page, but in some pretty sloppy reporting with a lot of editorial bias in what is included
and what is intentionally left out.
Case in point, reporting today on the newly disclosed Ghisline Maxwell documents only
mentioned Prince Andrew and not a word about Bill Clinton . Doesn't WSJ know its readers
draw from multiple media sources that have provided original content? Everyday there are
several similar, bias by omission, articles.
One can only hope newly constituted management team will finally get rid of Peggy
Noonan.
I'm 52, won't live past 80 and have $1.6 million. 'I am tired of both the rat race and workplace
politics.' Should I retire?
More
I don't have much in savings and feel lost. What can I do? Dear Wondering in Alamo, You bring up a question I
think a lot of people have been asking themselves lately.
https://s.yimg.com/rq/darla/4-2-1/html/r-sf.html
Start survey
U.S.
Your retirement distributions won't be taxed in these states: AARP
Ann Schmidt
,
Fox Business
•
July
31, 2020
There are 12 states that won't tax your distributions from
401(k)
plans,
IRAs or pensions, according to a recent report from
AARP
.
Of those states, nine -- Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas,
Washington and Wyoming -- don't have state income taxes.
Some states only partially tax retirement distributions, AARP reported. In Colorado, taxpayers over 65
can remove
$24,000
from
their federal AGI for their state taxes, according to AARP.
Other states have policies for taxes on retirement distributions that depend on your occupation before
retirement. For example, in Connecticut, teachers can subtract 25 percent of their retirement income from
federal AGI.
There are also 29 states that don't tax
military
retirement
income at all, AARP reported. Those states include Alabama, Arkansas, Connecticut, Hawaii, Idaho,
Illinois, Kansas, Louisiana, Maine, Massachusetts, Missouri, New Jersey, North Dakota, Ohio, Oregon,
Pennsylvania, Rhode Island, South Carolina, West Virginia and Wisconsin.
The remaining 21 states tax some or all of military retirement income, according to AARP.
One exception is in Virginia, where only recipients of the Congressional Medal of Honor are exempt from
taxes on their military retirement income, AARP reported.
Free speech is not a dimmer switch, its on or its off – you can’t have it both ways. Cancel culture is a reincarnation of
Stalinist purges, or McCarthyism.
Notable quotes:
"... The sort of "lose your job for engaging in speech" thing happens in other contexts, too. Companies routinely censor their employees' speech in ways small and large, and this includes completely non-political speech about purely technical matters. ..."
"... the government severely punishes employers whose employees speak in ways the government/the identity politics left (they are working together here) dislike, and so effectively outsources speech regulation to employers. ..."
"... The concern about cancel culture is in my observation largely driven by this dynamic: the frequent tagline right-leaning speech is violence, while left-leaning violence is speech" reflects the fact that getting some particular approach to a topic defined as "discrimination" ..."
"... Think about Rebecca Long-Bailey's recent demotion from the Labour shadow cabinet over a tweet she made. Last month, she retweeted a newspaper interview with prominent Labour-supporting actress Maxine Peake, calling her an "absolute diamond." The interview included an inaccurate claim from Peake ( based apparently on information in a Morning Star article, and which Peake subsequently withdrew when she was challenged on it) that the specific knee restraint used on George Floyd had been taught to Mineapolis police by Israeli secret police consultants. ..."
"... Long-Bailey lost the Shadow Education role, and her political career is likely over, ostensibly on the basis of this one tweet. ..."
"... The RLB case also throws a spotlight on language. The various rationales for cancelling listed in the OP -- racism, transphobia, or (in this case) antisemitism -- are rarely clear-cut in real-world instances ..."
"... This, I would suggest, is also related to power. The purpose of an accusation like this is to demonstrate the power or dominance of the cancelling agent, and to intimidate others by example. ..."
"... These concepts are capable of apparently endless linguistic elasticity. Indeed, it's when they're at their most extended or diffuse, that these grounds for cancellation seem to have the most signifying power. ..."
"... Everyone working in academia, the non-profit sector, and journalism is aware that there are many ideas broadly held which people hesitate to say because they are worried a group of their strident colleagues will try to destroy their career ..."
"... it is unquestionable that "canceling from the left" is a bigger threat from the right. ..."
"... Remember that the academic institutions in which controversies about 'cancel culture' exist are bourgeois institutions, pretty much like corporations. It is a world of authority, hierarchy, and carefully controlled behavior. ..."
"... As the power and prestige of the bourgeoisie shrink, the inmates of that particular cage will fight more fiercely for what's left. One way of fighting is to get someone's job by turning up something disreputable, such as the use of an apparently racist epithet. ..."
"... It seems to me that "cancel culture" is based on the infosphere's equivalent of the technological progress that now allows a small group of determined people with AK-47s to render a region ungovernable. ..."
"... The arms dealers don't care – they sell to everyone, and the more ammunition they sell, the more you'll need. ..."
"... Whether justified or not, a significant minority of Americans, across multiple lines, are fearful that their political opinions could endanger their jobs; this suggests the problem might be more than just people getting "bent-out-of-shape that they can't be raging bigots" . ..."
"... Purveyors of what-aboutery will probably appreciate that Steve Salita now makes a living as a bus driver ; I have no reason to think that the Harpers Letter signers (even Bari Weiss) would regard that situation as any more just than other examples. ..."
"... My position on this is that individuals shouldn't face public opprobrium unless there is 1) Clear and convincing evidence they are motivated by fundamentally malicious ends and 2) They have no remorse about it. Even when these conditions are met the opprobrium they receive should be clearly proportional to the wrong they've committed. We should relax these rules somewhat for celebrities, and a great deal for politicians, who have implicitly agreed to face criticism as a consequence of their role. ..."
"... In that testing sense, cancel culture can be seen as a type of supplementary social defense mechanism compared to the standard immune system response of trying to prove the political cult wrong in the eyes of unbiased observers; in too many historical cases, the immune response is weakened by factors such as adverse economic or geopolitical circumstances (e.g., a lost war) ..."
"... Cancel culture then works as (a) tracking and removal in the form of boycotts and ostracism, in that the infected cells(individuals) are removed from positions of influence, and (b) as a type of lockdown measure (censorship) that is warranted when the infected individual is transmitting patently false versions of current events or past history, and is starting to infect others around him. ..."
"... As to Peter's argument that cancel culture disfigures the left, I would add that the only cases where the radical left has seized power took place in the brutal aftermath of right-wing pandemics: e.g. the hyper-nationalism that led Germany and Russia among others to war in 1914, or KMT/warlord attempts to violently and brutally suppress peasant demands in the case of China. In such situations, it is no surprise that the radical left becomes infected with political cultism. ..."
"... Between those two positions there's a large space where people get harassed, threatened, ostracised and silenced for minor slips, reasonable disagreements, details that were lost in translation and failures to recite the correct thought-terminating cliches with sufficient conviction – basically, things that don't threaten anyone else's ability to speak. ..."
Racism from my perspective, looks like an unwillingness to evaluate people on an
individual basis, whether it's from sloth, contempt or disability and it's a terrible look
for an intellectual.
JQ @ 1: The sort of "lose your job for engaging in speech" thing happens in other
contexts, too. Companies routinely censor their employees' speech in ways small and large,
and this includes completely non-political speech about purely technical matters.
I know of a
case where a famous chip designer got up at a conference and said "none of you people talking
about Itanium [Intel's ia64 chip that was the future of microprocessors once upon a time]
actually think it's going to succeed -- why don't any of you admit it?"
Within moments he was
covered in PR and lawyers basically taping his mouth shut. When I worked in global enterprise
IT, I didn't post blog comments (neither political nor technical) b/c it was clear that
there would always be the possibility of career repercussions for making statements that
would have post-hoc repercussions
Companies censor their employees speech before-and-after-the-fact for lots of reasons,
sometimes political. This is a fact of life, and you're very right to point out that if
people actually cared about this [as opposed to getting bent-out-of-shape that they can't be
raging bigots] they'd support strong unions.
This is mainly a problem in the US because of employment at will.
Employment at will may contribute, but a larger part of the problem is that the US laws
around free speech are odd. Technically, the government cannot regulate speech at all (with
very limited exceptions, not relevant here.) In practice, though, what has happened (via
so-called "antidiscrimination" law) is that the government severely punishes employers whose
employees speak in ways the government/the identity politics left (they are working together
here) dislike, and so effectively outsources speech regulation to employers.
The concern about cancel culture is in my observation largely driven by this dynamic: the frequent tagline
right-leaning speech is violence, while left-leaning violence is speech" reflects the fact that getting some particular
approach to a topic defined as "discrimination" means that it is severely punished by government, at second-hand.
One thing that might be useful is distinguishing "cancel culture" as a phenomenon from
cancellation more narrowly defined as a tactic . So many of the discussions I've seen
recently about the issue seem content to operate at the big-picture level, asking whether
such a thing as cancel culture even exists (the New Statesman approach) or (if it
does) whether it's a good thing or a bad thing. Focussing in on actual cases, and thinking
about who (precisely) benefits from individual instances, might instead help us think about
the specific function of cancel culture, and the role that language plays in it.
Think about Rebecca Long-Bailey's recent demotion from the Labour shadow cabinet over a
tweet she made. Last month, she retweeted a newspaper interview with prominent
Labour-supporting actress Maxine Peake, calling her an "absolute diamond." The interview
included an inaccurate claim from Peake (
based apparently on information in a Morning Star article, and which Peake
subsequently withdrew when she was challenged on it) that the specific knee restraint used on
George Floyd had been taught to Mineapolis police by Israeli secret police consultants.
Long-Bailey lost the Shadow Education role, and her political career is likely over,
ostensibly on the basis of this one tweet. This, to me, is a fairly clear instance of
cancellation at work, but it would be inadequate to leave it at that. The complete lack of
commensurability between the transgression and the outcome would be incomprehensible without
asking how RLB's cancellation fits into Labour Party politics; that is, the function of
cancelling in this specific instance. Absolutely no one I know thinks this tweet proved
Long-Bailey was genuinely antisemitic, or that it was even the primary reason she was
demoted. Instead, it's been broadly (and, I think, correctly) interpreted as a signal from
the Starmer wing of the party that the Corbyn faction with which RLB is aligned has no future
in Labour. Cancellation, in this case, is a naked piece of power politics: a way of getting
political opponents out of the way.
The RLB case also throws a spotlight on language. The various rationales for cancelling
listed in the OP -- racism, transphobia, or (in this case) antisemitism -- are rarely
clear-cut in real-world instances. In fact, there's a kind of homeopathic logic at work,
where the more tendentious the attribution is, the more cut-through it often seems to have.
This, I would suggest, is also related to power. The purpose of an accusation like this is to
demonstrate the power or dominance of the cancelling agent, and to intimidate others by
example. ("If RLB got cancelled for this , then how little would I need to do
to suffer the same fate?") As Jonathan Dollimore has pointed out, there's a certain in-built
"linguistic imprecision" in many of the terms that cancellation depends on, and it's from
that imprecision that the capacity for intimidation or fear generation stems from.
These
concepts are capable of apparently
endless linguistic elasticity. Indeed, it's when they're at their most extended or
diffuse, that these grounds for cancellation seem to have the most signifying power.
Anon For Obvious Reasons 07.30.20 at 5:31 pm (
23 )
I find this deliberately misleading. "Cancel culture" in practice refers to the idea that
you shouldn't be ostracized by your peers, friends, or professional field for holding and
voicing ideas that are essentially mainstream.
Everyone thinks that if you insult someone with a racial slur, there should be
consequences.
But after that, what should be the proper "bound" that discourse should not cross? I would
argue that "any idea which can be studied rigorously" and "any idea held by a reasonably
broad cross section of society" is clearly within the bound, and we do ourselves a huge
disservice by refusing to countenance ideas in those sets. Further, as a commenter above
notes, most people in the world are not left-wing activists. Setting the norm that you
shouldn't be friends with/work with/hire/buy from people with ideas you find acceptable, but
which are not extreme, will be and has been a disaster for gay people, atheists, and many
others.
Everyone working in academia, the non-profit sector, and journalism is aware that there
are many ideas broadly held which people hesitate to say because they are worried a group of
their strident colleagues will try to destroy their career. The Shor example comes up
because, as Matt Yglesias pointed out yesterday, it is so obviously ridiculous to lose your
job for linking to a paper in APSR by a prominent (young, black) political scientist, and yet
there really are many people in that world, progressive political campaigns, who would
refuse to work with you if you hired Shor . It wasn't just his boss or "workplace
protections" – he was kicked out of the listserv that is the main vector for finding
jobs in that sphere, and his new employer remains anonymous on purpose!
And yes, this is not just a lefty thing. I'm sure that right-wing media sites, and church
groups, and the rest all have similar cases. Trump clearly "canceled" Kaepernick, with the
NFL's help. Yet we all agree that is bad! And in the sphere many of us are in, academia, it
is unquestionable that "canceling from the left" is a bigger threat from the right.
Trader Joe 07.30.20 at 2:17 pm @ 17 -- Remember that the academic institutions in which controversies about 'cancel culture' exist
are bourgeois institutions, pretty much like corporations. It is a world of authority,
hierarchy, and carefully controlled behavior. Obviously there is little expression which may
not have adverse consequences.
As the power and prestige of the bourgeoisie shrink, the
inmates of that particular cage will fight more fiercely for what's left. One way of fighting
is to get someone's job by turning up something disreputable, such as the use of an
apparently racist epithet.
This didn't start yesterday. There is a certain spillover into popcult as students emerge from academia into the outer, also declining world and repeat the
patterns which they have observed. Numerous stories are available, but I'll spare you. Anyway,
Mr. Taibbi has been ranting well, and you can go there.
Surprising to see so little emphasis on social media as the main catalyst. Tribalism is
the driver of "engagement" online, and if righteous anger at the out-group gets the clicks,
so be it. Consider how any Twitter post can become a tiny gleaming tableau, a battle flag, an
allegory of sin or virtue. Context and interpretation cannot be arbiters, and must only serve
the self-evident cause of loyalty to one's synthetic tribe. Faith and bad faith merge; that's
just optimal use of an app's system of influence. "We shape our tools and then our tools
shape us".
It seems to me that "cancel culture" is based on the infosphere's equivalent of the
technological progress that now allows a small group of determined people with AK-47s to
render a region ungovernable. This does not imply that the region's current government is a
good one. It does not imply anything about the group's views, except that debating them is
not likely to be on the agenda when they visit your village. There will no doubt be some
unpleasant people among the casualties; perhaps that counts as a silver lining.
The arms dealers don't care – they sell to everyone, and the more ammunition they sell,
the more you'll need.
"But the fact that the same example (David Shor) is cited every time the
issue is raised " here is one attempt to tabulate
cancellations, at least on the left identitarian side; I am not endorsing any particular
example. (NB: Sophie Jane in this case, not Sophie Grace.)
I would be curious about whether Henry approves of the
suppression of speech as much as the OP does.
Purveyors of what-aboutery
will probably appreciate that Steve Salita now makes a
living as a bus driver ; I have no reason to think that the Harpers Letter signers (even
Bari Weiss) would regard that situation as any more just than other examples.
There have been occasions in my life when I have justly and rightly experienced adverse
consequences as a result of things that I have said. The proposition that nobody should ever
experience adverse consequences as a result of statements made is utterly indefensible.
Discussions over "cancellation" can make things unnecessarily difficult because it's a
very hard term to define- exactly how badly does your public reputation have to be before you
are cancelled. All too often debates turn into "well so and so wasn't cancelled because they
still have a job/they still have a platform/they're still living their life." (Although your
post does avoid this by describing it in terms of an attempt instead of outcome) So to avoid
ambiguities that attend "cancellation", I prefer "opprobrium"
My position on this is that individuals shouldn't face public opprobrium unless there is
1) Clear and convincing evidence they are motivated by fundamentally malicious ends and 2)
They have no remorse about it. Even when these conditions are met the opprobrium they receive
should be clearly proportional to the wrong they've committed. We should relax these rules
somewhat for celebrities, and a great deal for politicians, who have implicitly agreed to
face criticism as a consequence of their role.
I support this anti-opprobrium position because being shamed publicly is extremely
painful. I would rather lose a limb than be widely publicly shamed and reviled, and I think a
lot of people feel the same way, so, by the golden rule and all of that
In terms of the position you outline it seems to me that we're going to agree on a lot of
issues. Pre-meditated use of racial slurs, for example. But I think there are a lot of
instances of cancel culture that we won't agree on.
Here's some people I think have been unfairly subject to vast amounts of pubic opprobrium
that some people would call cancel culture:
The p**nstar ( I won't spell it out because I'm at work) who killed herself in part
because of the criticism she received when tweeted out (homophobically) that she didn't want
to work actors who had done gay male scenes. While criticism would have been appropriate, the
torrent of backlash she received was disproportionate.
The woman who went to the Washington Post's cartoonist party in blackface in a very
misguided but not malicious attempt to satirize blackface and subsequently lost her job when
the Washington post named her in their paper. Natalie Wynn of Contrapoints – for many different things.
Glenn Greenwald over the age difference between him and his partner
Now I'm picking cases of opprobrium that came from the left broadly construed, because I
think of this as an internal conversation on the left. However, one thing that frustrates me
about this debate is that no one is acknowledging that the right are masters of excessive
opprobrium. Some examples:
Steven Salaita
Diane Abbott
Norman Finklestein
Matthew Bruenig
But maybe my position amounts to a silly apolitical wish that people would be nice to each
other, unless there's a very, very good reason not to.
Chris: An interesting case can be made in favor of cancel culture if we start thinking of
most political cults including communism, fascism, maga-Trumpism and other types of fake
populism as pandemics.
For starters, there is the testing. A positive test result is indicated by
(a) the talking
points or analysis are exclusionary toward one or more social groups that are being "othered"
based on any common aspect other than political actions that are unethical by some
well-defined criterion; the extent indicates the severity of the symptoms, and
(b) the
speaker or commenter is repeating someone else's talking points or writing rather than their
own attempts to understand the issue; the extent indicates the degree of infectiousness.
In that testing sense, cancel culture can be seen as a type of supplementary social
defense mechanism compared to the standard immune system response of trying to prove the
political cult wrong in the eyes of unbiased observers; in too many historical cases, the
immune response is weakened by factors such as adverse economic or geopolitical circumstances
(e.g., a lost war).
Cancel culture then works as (a) tracking and removal in the form of
boycotts and ostracism, in that the infected cells(individuals) are removed from positions of
influence, and (b) as a type of lockdown measure (censorship) that is warranted when the
infected individual is transmitting patently false versions of current events or past
history, and is starting to infect others around him.
I am not in complete agreement with the above political cults-as-pandemics theory, but it
has some compelling aspects in exceptional situations. Normally, the
political-economic-cultural discourse is sufficiently healthy that the standard "cure for bad
speech is more good speech" response is sufficient. Commenters above such as Peter Dorman are
assuming that the "body politic" has a healthy and undisrupted immune system, but I would
argue that is far from being the case right now; the U.S. is afflicted by oligarchic
politics, highly unequal and quasi-feudal economics that make appeals to the free market
laughable, and by standard of living deterioration in a large number of inner urban areas as
well as mid-tier and small cities. So the patient is immuno-compromised and additional
interventions are called for.
As to Peter's argument that cancel culture disfigures the left, I would add that the only
cases where the radical left has seized power took place in the brutal aftermath of
right-wing pandemics: e.g. the hyper-nationalism that led Germany and Russia among others to
war in 1914, or KMT/warlord attempts to violently and brutally suppress peasant demands in
the case of China. In such situations, it is no surprise that the radical left becomes
infected with political cultism.
The important thing is to know when to apply cancel culture
(and other resistance measures including mass disobedience) to left-wing movements that are
"infected". Post-1989 Eastern Europe is a good example, though now it is right-wing pandemics
that are taking hold. That is, cancel culture is not just for Lost Cause racism and
proto-fascism, but for all political movements that cross the border into cultism and
"othering".
Much of the pushback against cancel culture has come from prominent journalists and
intellectuals who perceive every negative reaction from ordinary people on social media as
an affront.
I don't think this is fair. As EB says @22:
The (wealthy, high profile) signers of the Harper's letter were not complaining on their
own behalf; they were complaining on behalf of the millions of people with no power or
money who are also threatened with mobbing if they voice divergent (not racist, not
transphobic, not misogyist) views.
JK Rowling is pretty hard to cancel; she has a mountain of cash, and her books are still
selling. But people who don't have a mountain of cash are going to look at examples like
children's author Gillian Philip, who appears to have been "let go" by her publisher after
being targetted by a cancellation campaign for tweeting "#ISTANDWITHROWLING", and think very
carefully about whether they can afford to stick their head over the parapet. Personally,
I've made a number of comments on Crooked Timber which I don't think were at all outside the
bounds of acceptable discourse – certainly not in the same category as the racist
speech you refer to (and at least one moderator must have agreed, because they were posted)
– but which I simply couldn't risk making without a pseudonym.
I often detect a bit of motte-and-bailey in the anti-anti-cancel culture argument. The
outer bailey is something like "cancel culture isn't the problem it's made out to be; it's
just how norms of acceptable behaviour are worked out these days"; the motte is "it's okay to
deplatform hardcore racists and holocaust deniers".
Between those two positions there's a large space where people get harassed, threatened,
ostracised and silenced for minor slips, reasonable disagreements, details that were lost in
translation and failures to recite the correct thought-terminating cliches with sufficient
conviction – basically, things that don't threaten anyone else's ability to speak.
Often this is done with the assistance of the false-flag social media "activist" accounts
that right-wing agitators use to pick away at fault lines on the left.
Even when there are no serious real-world consequences this tends to create a narrow,
stifling intellectual environment, which is what a large part of the opposition to "cancel
culture" is trying to prevent. You do realise, don't you, that Crooked Timber's willingness
to acknowledge heterodox views, on certain subjects, from the broad left puts it radically
out of step with most of the "progressive" Western Internet?
(There are other parts where cancel-culture tactics are used against different targets,
such as apostates and feminists in general (not just the wrong kind of feminists), which
hopefully we can all agree is not good.)
Basically, I don't think it's an adequate response to critique of cancel-culture to pick
out the cases where relatively mild tactics were used against acceptable targets, without
acknowledging that the critique is much broader than that.
"... Perhaps he was even the initiator of the White Helmets? My take away from those reports is that Cummings and Johnson have commenced a transition strategy within the UK and that the future of Integrity Initiative and its bogan crew may be limited. ..."
"... They have also restrained the MI6 manipulators that would conspire and contrive the overt 'Hate Russia' policy. Not that Bojo and Cummings will necessarily change anything other than a superficial rearrangement in their favour (for a month or two anyway). ..."
"... Caitlin Johnston has recently posted an astute analysis of the current distraction politics and why we should not be distracted by Covid19 rants from seeing the immediate rendition of the great game. ..."
"... I guess the UK will be less overt re Russia but expect the Libyan war to escalate as UKUSAI use Turkey in Libya to push back against Russia and even Sisi in Egypt. ..."
"... The UK could stage yet another 'Suez incident' with this mendacious confluence of opportunities. ..."
"... The USA has become the patsy for these thugs, when will they rise? ..."
Thank you for those John Helmer reports. I note that the new head of MI6 is a lover of all
fine Turkish things including Erdoghan. "Richard Moore, currently a third-ranking official of
the Foreign Office, an ex-Ambassador to Turkey; an ex-MI6 agent; and a Harvard graduate".
Perhaps he was even the initiator of the White Helmets? My take away from those reports is
that Cummings and Johnson have commenced a transition strategy within the UK and that the
future of Integrity Initiative and its bogan crew may be limited.
They have also restrained
the MI6 manipulators that would conspire and contrive the overt 'Hate Russia' policy. Not
that Bojo and Cummings will necessarily change anything other than a superficial
rearrangement in their favour (for a month or two anyway).
AtaBrit #9 includes an excellent link to a National Interest report on Turkey and is worth
the read in this context of the rise and rise of Richard Moore. Thank you AtaBrit.
I guess the UK will be less overt re Russia but expect the Libyan war to escalate as
UKUSAI use Turkey in Libya to push back against Russia and even Sisi in Egypt. They have a
willing US president now and likely continuing in the next few years (be it Trump or Biden).
The UK could stage yet another 'Suez incident' with this mendacious confluence of
opportunities.
The USA has become the patsy for these thugs, when will they rise?
Where will America's productivity miracle come from?
Public education is not teaching students what they need to know to compete in the global
economy.
According to the National Center for Education Statistics, math scores of U.S. students rank
30th in the world. The East Asian peers of today's American students will eat their lunch in
the growth industries of tomorrow.
Here's where Black Lives Matter has a real opportunity.
The protests. The riots. The calls for reparation payments. Social justice wealth transfers.
White privilege taxes. All the nonsense. Where's the strategy? Where's the long-range
'strategery'?
No doubt, those selling BLM T-shirts in Walmart parking lots are exercising gumption. But
it's not gonna cut it. Moreover, like bingo winnings, reparation payments will be quickly
squandered while the unhappiness remains.
And as far as we can tell the BLM movement is empty of ideas and without
direction.
lay_arrow
chubbar , 14 minutes ago
"If BLM was strategic"?????? Holy ****, if they were strategic they'd be making damn sure
that testing, like SAT scores, were no longer accepted as proof of accomplishment or
learning. Oh, wait?.......
Let's all agree, blacks don't want a "head to head" test, EVER.
I don't give a crap what they say, they don't want to be judged on MERIT, they love the
skin color test. That way they can always claim racism instead of ability.
libtears , 40 minutes ago
The BLM Movement is definitely empty of ideas and clear leadership. Their supposed goals
are all over the map from day to day. They are rudderless mobs of filthy vagrants and
criminal elements make up most of their movement.
What's going on which is credited to BLM has nothing to do with black people for the most
part. Commies have co-opted this movement and are engaging in anarchy to take down the system
of government. They will do whatever they want at all costs because they believe they have
the moral high ground. They are radicals just like people call them.
The best thing that could happen is for these loser mayors and governors to enforce the
law against these mobs of filthy scum.
How can you even reason with a mob of idiots that don't even have one, if not a hierarchy
of leadership and clear goals that they agree upon?
These people are taking a page out of the Bolshevik book on revolution. And they're much
weaker than the Bolsheviks, mentally and physically. One good thump on the head and these
b!tches are crying.
The longer the public allows teaching institutions to promote BLM the worse this sh!t is
going to get.
...
JaxPavan , 42 minutes ago
The Ford Foundation gave BLM $100 million to engage in terrorism. Who do you think bought
all those ultra high end looting vehicles?
quanttech , 39 minutes ago
Indeed, the BLM organization is primarily funded by mostly white-run corporations and
foundations. The money rules.
HopefulCynical , 22 minutes ago
And WHO is in control of the Ford Foundtion? WHO?!
Plunge in Consumption of Services Leads to Record 32.9 Percent Drop in GDP
By DEAN BAKER
The saving rate hit a record 25.7 percent level in the first quarter, indicating that few of
the pandemic checks were spent.
The Gross Domestic Product (GDP) shrank at a record 32.9 percent annual rate in the second
quarter. While almost all the major categories of GDP fell sharply, a 43.5 percent drop in
consumption of services was the largest factor, accounting for 22.9 percentage points of the
drop in the quarter. Nonresidential fixed investment also fell sharply, dropping at a 27.0
percent annual rate. Residential investment fell at a 38.7 percent annual rate.
The plunge in service consumption was expected since this was the segment of the economy
hardest hit by the shutdowns. Within services, health care, food services and hotels, and
recreation were the biggest factors reducing growth by 9.5 percentage points, 5.6 percentage
points, and 4.7 percentage points, respectively.
Spending on health care services fell at a 62.7 percent annual rate in the quarter. This was
due to people putting off a wide range of medical and dental checkups and procedures, which far
more than offset the care needed by coronavirus patients. The annual rate of decline for food
and hotel services was 81.2 percent and for recreation services 93.5 percent.
Consumption of nondurable goods fell at a 15.9 percent annual rate. Declines in clothing and
gasoline purchases were the biggest factors, taking 1.0 percentage point and 0.9 percentage
points off the quarter's growth, respectively. Demand for durable goods fell at just a 1.4
percent rate, but this followed a decline of 12.5 percent in the first quarter. Interestingly,
spending on cars actually rose slightly in the quarter, adding 0.15 percentage points to
growth.
Consumption expenditures by nonprofits serving households rose at 182.5 percent annual rate,
adding 3.0 percentage points to the quarter's growth. This reflects the effort by private
foundations and charities to ameliorate the hardships being experienced by many households.
Both structure and equipment investment fell sharply in the quarter, declining at 34.9
percent and 37.7 percent annual rates, respectively. The drop in equipment investment is
especially striking since it fell at a 15.2 percent rate in the first quarter. Investment in
intellectual products fell at a more modest 7.2 percent annual rate. Residential investment
fell at a 38.7 percent annual rate, although this followed a jump of 19.0 percent in the first
quarter.
Exports and imports both fell sharply, with exports dropping at a 64.1 percent rate and
imports falling at a 53.4 percent rate. Because US imports are so much larger than exports,
trade actually added 0.7 percentage points to growth in the quarter.
Federal government spending rose at a 17.4 percent annual rate, driven by a 39.7 percent
increase in non-defense spending, presumably most of which is pandemic related. State and local
spending fell at a 5.6 percent rate, likely reflecting school closings in the quarter.
[Graph]
Prices fell sharply in the quarter, with the Personal Consumption Expenditure (PCE) deflator
falling at a 1.9 percent annual rate and the core PCE falling at a 1.1 percent annual rate.
These declines reflected sharp drops in the price of items such as gasoline, hotels, and
clothes. Many of these declines were already being reversed by the end of the quarter. They
will almost certainly not continue into the third quarter.
The savings rate soared to a record 25.7 percent. This reflects the jump in disposable
income attributable to the pandemic checks, coupled with the sharp drop in spending. Nominal
disposable income rose at a 42.1 percent annual rate. This rise was, of course, uneven, with
people who were still getting their regular paychecks or retirees seeing large jumps in income
from the pandemic checks, but with many of the unemployed seeing sharp drops.
With the economy mostly reopened, despite serious outbreaks of the pandemic in large parts
of the country, we are virtually certain to see strong growth in the third quarter. But even if
the economy grows at a 15 or 20 percent annual rate, it would be nowhere close to recovering
the losses from the last two quarters.
The shape of the rescue package currently being debated will also be hugely important. In
addition to the unemployment insurance supplements that will be necessary for laid-off workers
to sustain their consumption, state and local governments will need large amounts of money both
to avoid layoffs and to implement programs for the safe reopening of schools, workplaces and
businesses. In this context, it is very difficult to see any economic rationale for the $1,200
pandemic checks.
After some level inequality is akin to cancel -- it can destroy the society. In a countries
with very high level of inequality the government can't rely on loyalty of people. It also leads
to the proliferation of "guard labor" in one form or another.
Just think what it means for the USA counterintelligence now. Add to this the collapse of the
neoliberal ideology which also does not help to instill the loyalty.
Yves here. So many of health costs of inequality are obvious, yet most people seem trained
to look past them. And Congress fiddles about a new stimulus package, with the odds of getting
it back on track soon not looking very good, while Americans have rent and mortgage payments
looming.
By Richard D. Wolff, professor of economics emeritus at the University of Massachusetts,
Amherst, and a visiting professor in the Graduate Program in International Affairs of the New
School University, in New York. Wolff's weekly show, "Economic Update," is syndicated by more
than 100 radio stations and goes to 55 million TV receivers via Free Speech TV. His two recent
books with Democracy at Work are Understanding Marxism and Understanding Socialism , both
available at democracyatwork.info . Produced by Economy for All , a project
of the Independent Media Institute
Capitalism, as Thomas Piketty's Capital in the Twenty-First Century shows,
relentlessly worsens wealth and income inequalities. That inherent tendency is only
occasionally stopped or reversed when masses of people rise up against it. That happened, for
example, in western Europe and the U.S. during the 1930s Great Depression. It prompted social
democracy in Europe and the New Deal in the United States. So far in capitalism's history,
however, stoppages or reversals around the world proved temporary. The last half-century
witnessed a neoliberal reaction that rolled back both European social democracy and the New
Deal. Capitalism has always managed to resume its tendential movement toward greater
inequality.
Among the consequences of a system with such a tendency, many are awful. We are living
through one now as the COVID-19 pandemic, inadequately contained by the U.S. system, savages
Americans of middle and lower incomes and wealth markedly more than the rich.
The rich buy better health care and diets, second homes away from crowded cities, better
connections to get government bailouts, and so on. Many of the poor are homeless. Tasteless
advice to "shelter at home" is, for them, absurd. Low-income people are often crowded into the
kinds of dense housing and dense working conditions that facilitate infection. Poor residents
of low-cost nursing homes die disproportionally, as do prison inmates (mostly poor). Pandemic
capitalism distributes death in inverse proportion to wealth and income.
Social distancing has destroyed especially low-wage service sector jobs. Rarely did
top executives lose their positions, and when they did, they found others. The result is a
widened gap between high salaries for some and low or no wages for many. Unemployment invites
employers to lower wages for the still employed because they can. Pandemic capitalism has
provoked a massive increase in money-creation by central banks. That money fuels rising stock
markets and thereby enriches the rich who own most shares. The coincidence of rising stock
markets and mass unemployment plus falling wages only adds momentum to worsening
inequality.
Unequal economic distributions (of income and wealth) finance unequal political outcomes.
Whenever a small minority enjoys concentrated wealth within a society committed to universal
suffrage, the rich quickly understand their vulnerability. The non-wealthy majority can use
universal suffrage to prevail politically. The majority's political power could then undo
the results of the economy including its unequal distribution of income and wealth. The rich
corrupt politics with their money to prevent exactly that outcome. Capitalists spend part of
their wealth to preserve (and enlarge) all of their wealth.
The rich and those eager to join them in the U.S. dominate within both Republican and
Democratic parties. The rich provide most of the donations that sustain candidates and parties,
the funding for armies of lobbyists "advising" legislators, the bribes, and many issue-oriented
public campaigns. The laws and regulations that flow from Washington, states, and cities
reflect the needs and desires of the rich far more than those of the rest of us. The peculiar
structure of U.S. property taxes offers an example. In the U.S., property is divided into two
kinds: tangible and intangible. Tangible property includes land, buildings, business
inventories, automobiles, etc. Intangible property is mostly stocks and bonds. Rich people hold
most of their wealth in the form of intangible property. It is thus remarkable that in the
U.S., only tangible property is subject to property tax. Intangible property is not subject to
any property tax.
The kinds of property (tangible) that many people own get taxed, but the kinds of property
(intangible) mostly owned by the richest minority do not get taxed. If you own a house rented
to tenants, you pay a property tax to the municipality where the house is located. You also pay
an income tax on the received rents to the federal government and likely also the state
government where you live. You are thus taxed twice: once on the value of the property you own
and once on the income you derive from that property. If you sell a $100,000 house and then buy
$100,000 worth of shares, you will owe no property taxes to any level of government in the
United States. You will only owe income tax on dividends paid to you on the shares you own. The
form of property you own determines whether you pay property tax or not.
This property tax system is excellent for those rich enough to buy significant amounts of
shares. The rich used their wealth to get tax laws written that way for them. The rest of us
pay more in taxes because the rich pay less. Because the rich save money -- since their
intangible property is not taxed -- they have that much more to buy the politicians who secure
such a tax system for them. And that tax system worsens inequality of wealth and income.
Unequal economic distributions finance unequal cultural outcomes. For example, the goal of a
unifying, democratizing public school system has always been subverted by economic inequality.
In general (with few exceptions), the better schools cost more to attend. The tutors needed to
help struggling students are affordable for the rich but less so for everyone else. The
children of the wealthy get the private schools, books, quiet rooms, computers, educational
trips, extra art and music lessons, and virtually everything else needed for higher educational
achievement.
Unequal economic distributions finance unequal "natural" outcomes. The U.S. now displays two
differently priced foods. Rich people can afford "organic" while the rest of us worry but still
buy "conventional" food for budget reasons. Countless studies indicate the dangers of
herbicides, pesticides, chemical fertilizers, food processing methods, and additives.
Nonetheless, the two-price food system delivers the better, safer food more to the rich than to
everyone else. Likewise, the rich buy the safer automobiles, more safely equip their homes, and
clean and filter the water they drink and the air they breathe. No wonder the rich live years
longer on average than other people. Inequality is often fatal, not just during pandemics.
In ancient Greece, Plato and Aristotle worried about and discussed the threat to
community, to social cohesion, posed by inequalities of wealth and income. They criticized
markets as institutions because, in their view, markets facilitated and aggravated income and
wealth inequalities. But modern capitalism sanctifies markets and has thus conveniently
forgotten Plato's and Aristotle's cautions and warnings about markets and inequality.
The thousands of years since Plato and Aristotle have seen countless critiques, reforms, and
revolutions directed against wealth and income inequalities. They have rarely succeeded and
have even more rarely persisted. Pessimists have responded, as the Bible does, with the notion
that "the poor shall always be with us." We rather ask the question: Why did so many heroic
efforts at equality fail?
The answer concerns the economic system, and how it organizes the people who work to
produce and distribute the goods and services societies depend on. If its economic organization
splits participants into a small rich minority and a large non-rich majority, the former will
likely be determined to reproduce that organization over time. Slavery (master versus slave)
did; feudalism (lord versus serf) did; and capitalism (employer versus employee) does.
Inequality in the economy is a root cause contributing to society-wide inequalities.
We might then infer that an alternative economic system based on a democratically organized
community producing goods and services -- not split into a dominant minority and a subordinate
majority -- might finally end social inequality.
Wow! I just can say this is very well pointed and that It must be understood we cannot
expect empathy from the well off. Even if some are empathic by nature they just cannot see
what's really happening given how wide is the rift.
inequality is a state of nature. blame god .right.
but here in this humanistic creation, we ought not institutionalize inequality.
That is one of the big points of monetary reform.
The current federal reserve system and the banking system ,having control of the "money
creation" of this country, PROMOTES wealth inequality.
The nationalization of the fed, and the ending of banks creating money; is the main essence
of monetary reform. The people who have been trying to discuss the world with a different
,more equal access to the fiat created "for the people to use, for the economy to
function",point to the growth of inequality by the nature of how the system currently is
structured. They point to how our money is created and by whom.They point to who gets "the
debt"
Some people try to dismiss the 100 year history of the fed promoting inequality as a bug .
but how can someone not see it is a feature, The monetary system we have now was created by
an act of law. It would be unconstitutional ,if not for the federal reserve act. Allowing the
banks to create money.Instead of the congress..as the constitution explicitly stated.
But now, we are no longer a fledgling republic.
The world accepted our fiat, as created by bankers now we ought to create our own money and
retire our national debt.Heal ourselves, to lead forward in the future. Time to write a new
law . https://www.congress.gov/bill/112-thcongress/house-bill/2990/text
Pessimists have responded, as the Bible does, with the notion that "the poor shall
always be with us."
The Bible does not say that, it says:
However, there will be no poor among you , since the Lord will surely bless you in the
land which the Lord your God is giving you as an inheritance to possess, if only you listen
obediently to the voice of the Lord your God, to observe carefully all this commandment which
I am commanding you today. Deuteronomy 15:4 [bold added]
But just a few verses later:
For the poor will never cease to be in the land ; therefore I command you, saying, 'You
shall freely open your hand to your brother, to your needy and poor in your land.'
Deuteronomy 15:11 [bold added]
Taken together, these verses are not about the inevitability of poverty but the
inevitability of poverty from DISOBEDIENCE to what is being commanded – especially, i
suppose, wrt economic justice.
So though we might never completely eliminate poverty, it can certainly be reduced to the
extent we are willing to obey – per the Bible.
And as anyone who has read the Old Testament should know, the US is far from obedience wrt
economic justice (e.g. Deuteronomy 23:19-20, e.g. Leviticus 25).
"If you own a house rented to tenants, you pay a property tax to the municipality where
the house is located."
the above means that you are already up the income ladder enough to not qualify as being low
income _ most of the country is low income since the word Low is comparative – it is
comparative to the cost of living –
So the above property tax is paid by the tenant – the carry costs by the tenant and the
profit – by the tenant.
So the rent is a high cost of living due to the bidding up or asset inflation that most
"investment goes into today"
A key way to reduce inequality is through a tax system that penalizes activities that tend to
raise the cost of living – tax heavier the investments that inflate asset prices
(assets are things already created).
Taxing something is to put a burden upon an activity
Why we tax labor so much – who knows
When it comes to the value of money everything is skewed. If Picketty were analyzing money
as merely a medium of exchange and not a store of wealth he'd have much less inequity. When
the value of money is considered in on-the-ground finance operations "lost opportunity" is
considered into the interest rate. Lost opportunity is totally ignored on a human level.
You'd think that money itself was a person.
Another 1.416 million Americans filed new claims for unemployment benefits last weekOur
politicians want to encourage people "to go back to work", but for millions upon millions of
Americans the jobs that they once had are gone forever.
52 million Americans have filed new claims for unemployment benefits over the past 18
weeksBut many people that live in rural communities are feeling pretty good aboutthings right
now. Even though more than 52 million Americans have filed new claims for unemployment
benefits over the last 18 weeks, the official unemployment rate in many rural counties is
still in the single
digits.
New York's unemployment rate rose to 20.4% last month, according to state-level data
issued
Friday by the Bureau of Labor Statistics that detailed figures for some large metro areas.
That'sup from 18.3% in May and 15% in April.
Los Angeles, the second-largest U.S. city, has seen a similar level of joblessness.Its
unemployment rate recovered slightly in June but remains startlingly high -- at 19.5%, versus
20.6% in May, according to data published Friday by California's Employment Development
Department.
Census Bureau says that things are particular dire for Black and Hispanic renters This
month (JUNE), nearly 28% of Black renters say they haven't paid last month's rent, and \about
46% say they have slight or no confidence they'll be able to pay next month's rent, according
to figures from the Census Bureau's Household Pulse Survey. Hispanic renters face similar
economic strain: 22% say they missed last month's rent and 46% fear they won't make rent next
month.
In April, 78% of those in households experiencing job loss felt that that situation would
be temporarily. But now, 47% think that job loss is likely to be permanent, according to The
Associated Press-NORC Center for Public Affairs Research.
19 percent of all U.S. small businesses were closed, According to Jefferies,
Nearly a quarter of all small businesses in the entire country are closed
And the really bad news is that many of them will never end up reopening
As many as 76,000 small businesses in New York City – a third of the 230,000
citywide – may never reopen after forced to close during the COVID-19 lockdown,
business leaders have warned.
Nearly half of all small-business members of the San Francisco Chamber of Commerce lost 100%
of their sales or closed down completely.
Yelp says that a whopping 60 percent of the restaurants that were initially listed
as"temporarily closed" on their site are now classified as permanetly
closed...
Air travel is another industry that is being absolutely devastated by this pandemic.After
a modest bounce in June, the number of air passengers is starting to fall again.The
resurgence of coronavirus infections is derailing the travel industry's modest recovery. The
number of air passengers processed through TSA security lines fell during the week ended July
20, compared with the prior week, according to Bank of America. This metric is down more than
70% from a year ago.
United (UAL) CEO Scott Kirby told CNBC on Wednesday that the airline doesn't "expect to
get anywhere close to normal until there's a vaccine that's been wiely distributed to a large
portion of the population" !! (Hello Big Pharma Inc.)
http://theeconomiccollapseblog.com/
(Whatever one might think about that blog, but most numbers are proberly back up
with so callled serious sources aka links.)
It is by far its worst quarterly plunge, and has thrown tens of millions out of work and
sent unemployment surging to 14.7 per cent, the US Government said on Thursday (local
time).
The Commerce Department's estimate of the second-quarter decline in the gross domestic
product marked the sharpest such drop, according to records dating back to 1947."
@ b who wrote
"
The economic damage the pandemic has caused in the U.S. is extreme:
"
The pandemic is a set up for the economic damage more than it caused itself, IMO. The
economic system started crashing last September. Empire has been in frantic mode. in case you
hadn't noticed, to find a patsy to blame for the economic crash. I believe that response to
the pandemic was designed to project the most economic impact to cover for the financial
structural deficiencies underneath. Jobs going away to automation is not a new trend, nor is
reduction of consumption due to less disposable income.....there really has been no economic
recovery for the masses since 2008.
And that great Man for Humanity, as some here still believe, Trump has been proposing
things like suspending the payroll tax which would kill the Social Security Insurance
program, pushing back the election to a better time`and deflecting responsibility for the
hundred thousand and counting dead because Empire is designed for profit, not people and
comparison with China's results are telling.
This is what living under the dictatorship of global private finance provides for the
masses which pales in comparison with public finance centered nations.
ll eyes are on the declining number of unemployed. The May and June jobs reports chronicle
the reabsorption of 5.3 million who lost their jobs in the COVID-19 pandemic. Twelve million
jobs to go to reach pre-pandemic employment.
Yet prior to the pandemic, there were 18 million Americans missing from the economy. These
persons were neither employed nor seeking employment -- nor retirees, students or in-home
caregivers -- and therefore were excluded from the Bureau of Labor Statistics count of the
workforce. In order that America emerge from the pandemic stronger than before, a concerted
initiative by federal and state governments to move them back into the economy -- using
existing resources -- must begin now.
...
Research on the social determinants of health finds that employment has a
very strong correlation with positive health outcomes. To exist as a non-participant in
the economy is thus an invitation to dire health outcomes including premature death.
What's more, these individuals are needed as contributors to our national commonweal,
fueling increased economic and social progress. And people engaged in productive activities
are much less likely to engage in negative and destructive behaviors.
... The USDA's food stamp program has a robustly funded, though underutilized, employment
and training grant. States use the excuse of USDA's partial match requirement as a reason to
opt out.
PS likbez@46 reminded me of a line from the movie Reds. Warren Beatty's John Reed spoke of
people who "though Karl Marx wrote a good antitrust law." This was not a favorable comment.
The confusion of socialism and what might be called populism is quite, quite old. Jack
London's The Iron Heel has its hero pointing out even before the Great (Class) War that the
normal operations of capitalism, concentration and centralization, destroyed the middle class
paradise of equal competition. It wasn't conspiracies.
likbez 07.29.20 at 3:30 pm
@steven t johnson 07.29.20 at 3:14 pm (51)
Jack London's The Iron Heel has its hero pointing out even before the Great (Class) War
that the normal operations of capitalism, concentration and centralization, destroyed the
middle class paradise of equal competition.
I think the size of the USA military budget by itself means the doom for the middle class,
even without referring to famous Jack London book (The Iron Heel is cited by George Orwell 's
biographer Michael Shelden as having influenced Orwell's most famous novel Nineteen
Eighty-Four.).
Wall Street and MIC (especially intelligence agencies ; Allen Dulles was a Wall Street
lawyer) are joined at the hip. And they both fully control MSM. As Jack London aptly said:
"The press of the United States? It is a parasitic growth that battens on the capitalist
class. Its function is to serve the established by moulding public opinion, and right well it
serves it." ― Jack London, The Iron Heel
Financial capitalism is bloodthirstily by definition as it needs new markets. It fuels wars.
In a sense, Bolton is the symbol of financial capitalism foreign policy.
It is important to understand that finance capitalism creates positive feedback loop in the
economy increasing instability of the system. So bubbles are immanent feature of finance
capitalism, not some exception or the result of excessive greed.
A weekly survey showed food insecurity at a high in July
Millions are out of work as Congress debates new stimulus
[Image removed]
People wait in their vehicles to receive food at a drive-thru food
distribution event in Chula Vista, California, on May 1.
Food insecurity for U.S. households last week reached its highest reported level since the Census Bureau started
tracking the data in May, with almost 30 million Americans reporting that they'd not had enough to eat at some point
in the seven days through July 21.
In the bureau's weekly Household Pulse Survey, roughly 23.9 million of 249 million respondents indicated they had
"sometimes not enough to eat" for the week ended July 21, while about 5.42 million indicated they had "often not
enough to eat." The survey, which began with the week ended May 5, was published Wednesday.
The number of respondents who sometimes had insufficient food was at its highest point in the survey's 12 weeks. The
number who often experienced food insufficiency was at its highest since the week ended May 26.
Food Insufficiency
A growing number of survey respondents say they don't have enough to eat
U.S Census Bureau Household Pulse Survey
This follows deep recession resulting from the pandemic, which put millions of Americans out of work. Unemployed
Americans have been receiving an extra $600 per week benefit, which is set to expire at the end of July as Congress
debates a new relief package.
Other high-frequency data, including Household Pulse jobs numbers, indicate that the U.S. economic recovery may be
stalling out at virus cases spike around the country and states roll back their reopening plans.
Meanwhile, great line from an infosec researcher and teacher here in San Francisco about
whether university classes will reopen:
Sam Bowne @sambowne Jul 26
Q: "When will this class be offered?" A: "Difficult to say, because there's a critical budget
crisis at the college, city, state, and national level, and most if not all the officials at
every level appear to be corrupt, incompetent, and insane."
"... The problem for the US is that China is the world's biggest semiconductor market and biggest chip importer on the world ..."
"... these bans are lose lose situation for both the US and China ..."
"... I do not think that Pompeo is smelling blood and moving for the jugular, its not such a situation as China is not that vulnerable, it is more likely to be US elite anger due to the US weakening and China gains during the Covid-19 crisis. ..."
"... Trump strategy of bullying works many times. Supposedly there should be costs for the US in soft power and world opinion, but we are not seeing them. ..."
"... I guess most of the world is too cowardly and prefers to go with the flow. They will abandon the US only after the US lost anyway. Well, it is not an easy situation. Still, the US reactions are very strong and hateful precisely because things are still not good for it and its decline is continuing, regardless of some tactical victories, where in some cases it is a lose lose situation anyway. ..."
A Significant Decline Is Coming For The U.S.james , Jul 27 2020 18:10 utc |
1
by Passer by
In response to several comments in the last
open thread (slightly edited).
Actually there is even some real, and not only relative, decline for the US, for example
US life expectancy is dropping. This is a pretty bad sign for a developed country. Same for
the UK by the way.
On the issue of China gaining during the Covid crisis, they gained in raw power, for
example gained in GDP relatively to the US. And they gained in debt levels too, relatively,
as US debt levels exploded due to the crisis. Now you have V-shaped recovery in China and
poor, W-shaped double dip recovery in the US. With far more debt added.
Of course there is the issue of public relations and soft power. On the one hand the US
blamed China for the pandemic, but on the other hand it embarrassed itself due to its poor
performance in containing the pandemic, compared to other countries. And the US lost points
around the world due to rejecting WHO right in the middle of the pandemic. Europe and
developing countries did not like that at all. Don't forget that Covid also weakened the US
military, they have problems with it, including on ships and overseas bases, and even broke
the biggest US exercise planned in Europe for the last 30 years. And the pandemic in the US
is still raging, its not fixed at all and death rates are increasing again.
Here for example, the futurologists from Pardee Canter that that China gained during the
crisis, in raw capabilities. Future research and relative power between countries is
their specialty :
Research Associate Collin Meisel and Pardee Center Director Jonathan Moyer use IFs
(International Futures) to explore the long-term impact of COVID-19 in China in this Duck
Of Minerva blog post" "Where broad measures of material capabilities are concerned, the
picture is clear: COVID-19 is closing the gap in relative capabilities for the U.S. and
China and accelerating the U.S.-China transition. Through multiple long-term forecast
scenarios using the International Futures tool,
Research Associate Collin Meisel and Pardee Center Director Jonathan Moyer explain on the
Duck of Minerva blog that China is likely to gain approximately one percent of global
power relative to the U.S. by 2030 due to the economic and mortality impacts of COVID-19.
This share of global power is similar to the relative capabilities of Turkey today.
On the issue of the USD, Stephen Roach
also says that there will be a significant decline in the medium term. And the argument
is pretty logical - if the US share in the global economy is declining (and it will be
declining at least up to year 2060), and if the level of US debts is reaching all time high
levels, then the USD will decline. I agree with that argument. It is fully logical.
On the chip/semiconductor issue. David Goldman is skeptical that the US will be able
to stop
China on this :
The chip ban gives the world an enormous incentive to circumvent the US
Basically Huawei still has advanced suppliers, from South Korea and Japan. And
some of them are refusing to yield. The problem for the US is that China is the world's
biggest semiconductor market and biggest chip importer on the world , which gives
enormous initiative for private businesses to circumvent US made equipment in order to export
to China. Then also China is stashing large quantities of chips. By 2025, it should be able
to replace foreign production with homegrown. So these bans are lose lose situation for
both the US and China - yes, this will cause come costs to China up to 2025. But it will
also lead to US companies, such as Qualcomm, to lose the Chinese chip market, which is the
largest in the world, and there is nothing to replace it.
These are hundreds of billions of losses for the US due to gradually losing the most
lucrative market. Thus, in relative terms, China does not lose from these games, as the US
will pay a large price just as China. It is lose-lose situation, but in relative terms the
same. US loses just as China loses. And do not forget that China warned that a full US attack
on Huawei will lead to Boeing being kicked from the country, which is becoming the biggest
aviation market in the world, and will lead to hundreds of billions of losses for that
company too, and will probably burry it under Airbus. China needs lots of planes up to 2028,
when they will replace them with their own, worth hundreds of billions of dollars. Elevating
Airbus over Boeing, which already has big troubles, will be a significant hit for the US
aerospace industry.
So China has cards to play too. On the issue of the US getting some countries to ban
Huawei, it is again lose - lose situation - that is both the US and some of its allies will
lose due to using more expensive 5G equipment and will lose more time to build their
networks. So China loses, and US and some allies lose, but in relative terms things remain
the same between them power-wise, as they both lose. Do not forget that Germany said that
it will continue to use Huawei equipment, and this is the biggest economy in Europe:
Germany's three major telecommunications operators Deutsche Telekom, Vodafone and
Telefonica have been actively promoting 5G in recent years. They implement the "supplier
diversification" strategy and use Huawei equipment in their networks among other vendors.
Peter Altmaier, German minister of economy, told the Frankfurter Allgemeine Zeitung on July
11 that Germany would not exclude Huawei from the country's 5G network rollout. "There can
only be an exclusion if national security is demonstrably at risk. However, we will
strengthen our security measures, regardless of which country the products come from," said
Altmaier. "There is no change in Germany's position," a spokesperson of the country's
Interior Ministry told local broadcaster ARD on July 16.
So we can say that probably half of Europe will be using Huawei. Still, as you said, a
large part of the world will exclude it. Maybe half of world's GDP. Unfortunately things are
not perfect. One bright spot in that is that Huawei is betting on emerging markets, and
emerging markets have higher growth rates than western markets - that is, they will matter
more in the future.
I would agree that the US is harming China, but the damage is not large IMO, as these are
mostly lose lose situations where relative power stays the same. And with time, there will be
significant damages for the US too, such as losing the biggest chip and aviation markets and
the empowerment of Boeing competitors such as Airbus.
So its not too bad in China. Thus, after mentioning all of this, I do not think that
Pompeo is smelling blood and moving for the jugular, its not such a situation as China is not
that vulnerable, it is more likely to be US elite anger due to the US weakening and China
gains during the Covid-19 crisis.
On Hong Kong China had no options. It was a lose-lose situation. If they allowed
everything to stay as it is there would be constant color revolution there and they will be
constantly in the media. Maybe it is better to stop this once and for all. They hoped that
the Covid crisis will give them cover to do this. It did not work very well.
Unfortunately it is right that the Trump strategy of bullying works many times.
Supposedly there should be costs for the US in soft power and world opinion, but we are not
seeing them.
I guess most of the world is too cowardly and prefers to go with the flow. They will
abandon the US only after the US lost anyway. Well, it is not an easy situation. Still, the
US reactions are very strong and hateful precisely because things are still not good for it
and its decline is continuing, regardless of some tactical victories, where in some cases it
is a lose lose situation anyway.
The data shows a
significant decline incoming for the US.
2019 China 1,27 times bigger in GDP/PPP
2030 China 1,8 times bigger in GDP/PPP
US debt to GDP 2019 80%
US debt to GDP 2030 125%
US debt to GDP 2050 230 %
The Highway Trust Fund (HTF) will be depleted by 2021, the Medicare Hospital Insurance (HI)
trust fund by the beginning of 2024, the Social Security Disability Insurance (SSDI) trust
fund in the 2020s, the Pension Benefit Guarantee Corporation (PBGC) Multi-Employer fund at
some point in the mid-2020s, and the Social Security Old-Age and Survivors Insurance (OASI)
trust fund by 2031. We estimate the theoretically combined Social Security OASDI Trust fund
will run out of reserves by 2031.
Military budget (before Covid estimates, Trump budget) 2019 3,2 % of GDP - 2030 2,5 %
of GDP (Could drop to 2,3 % of GDP due to Covid)
Civilian discretionary spending (before Covid estimates) 2019 3,2 % of GDP - 2030 1.8 %
of GDP (drop to all time low) (Could drop further due to Covid)
That is not to mention the big divide in US society, and the ongoing Covid crisis, which
is still not fixed in the US. But is largely fixed in China. Do you see the decline now? They
have a big, big reason to be worried. A significant decline is coming for the US.
Posted by b on July 27, 2020 at 17:53 UTC | Permalink
thanks for highlighting 'passer by's post b... i agree with them for the most part... it
reminds me of a game of chess where pieces are being removed from the board.. it is a lose-
lose, but ultimately, it is a bigger loss for the usa down the road... for whatever reason
the usa can't see that the financial sanctions, bullying and etc, only go so far and others
work around this as we see with russia, iran, venezuala and china in particular...
the one comment i would view differently then passer by is this one - "Unfortunately it is
right that the Trump strategy of bullying works many times. Supposedly there should be costs
for the US in soft power and world opinion, but we are not seeing them." i think the usa is
losing it's position in terms of soft power and world opinion but you won't be reading about
it in the western msm.. that is going to come out later after the emergence of a new reality
is very clear for all to see... the trump strategy is really more of the same and it is like
a medicine that loses it's power over time and becomes ineffective - sort of like
antibiotics...
In other words the western oligarchs will lose out to the eastern oligarchs in the Great
Trade War under the cover of a fake pandemic.
Or perhaps the global oligarchs in general just want the world to follow more in the
Chinese model where the population is more agreeable to total surveillance, social credit
scores and even more out right fascistic government/corp model under the cover of a fake
pandemic.
With respect to "bullying works", in international diplomacy it usually does since weaker
powers have more to lose in a direct diplomatic crisis with a larger power. This is not to
say that they won't push back, but they will be far more strategic in where they do. In
essence, weaker powers have fewer "red lines" but they will still enforce those, while
greater powers have more "red lines", because they have more power to squander on
fundamentally insignificant issues. However, weaker states will still remember being abused
and oppressed, so when the worms turns while they won't be the first to jump ship, they will
be more than eager to pile on and extract some juicy retribution once it is clear they will
not be singled out. I suspect the Germany will be the bellwether, when (if) Germany breaks
from the US on a key aspect on the transatlantic relationship that will be the signal for
others to start jumping ship. If Nordstream 2 go through, then there will be a break within 5
years; if Nordstream is killed, then the break might be delayed for 5 years or more but there
will still be a break when the US pushes Germany to support the next major US regime change
war in the Middle East.
The engineered collapse is being called the "Great Reset" by many outlets already. The
covid nonsense is just a cover for it. Instead of Saudi Arabian terrorist it is a basically a
harmless coronavirus. Just in the days immediately following 911 the "terrorist'' threat was
so overhyped that security theater was employed everywhere. Now sanitation theater is the new
act in town.
Where does anyone get these numbers about military spend as a % of gdp? Have you listened
to Katherine Austin Fitts on Corbett Report?
Posted by: oglalla | Jul 27 2020 18:27 utc | 4
Good to see your comment. Lots of anecdotal evidence nationwide about store closures and
many vacancies in business centers, particularly within economic engines of NYC and elsewhere
along the East Coast. IMO, lots of self-censorship by business media while the reality
reported by Shadowstats goes ignored. As for losing the status of #1 economy, that was always
going to occur once China or India became a moderately developed economy. It just happened
that China is far more efficient politically which allowed it to become #1. And until India
improves politically, it will continue to lag behind numerous smaller nations. Too bad there
isn't a place where one can bet on the great likelihood that the Outlaw US Empire will
outperform all nations in the production of Bullshit and Lies.
I also disagree with the comparison between USA and China gdp and other statistics.
China is not simply competing against USA but against the Empire: 5 eyes, NATO, Euro
poodles, Israel and the Gulf States and others like Mexico, Columbia, Brazil, India.
Anyone that is minimizing the conflict and the advantages of one side vs another is doing
a disservice.
CitizenX @ 26
Agree with your tone and content.
Particularly the third from last paragraph. I think people are missing by choice the growing
ground-swell of public opinion US wide as this blog shows, a multi-faceted detereation of US
political morals and legality.
Combined with a world wide growing awareness of how deranged American leaders now are.
Haterd consumes itself as dose greed.
My ear to the ground tells me, the protests at present are growing some in full sight some
not.
This is not buseness as usual. Then return to normal. The mood now is -- -- - let's settle
this thing once and for all, let's get the job done.
So my personal opinion ? we will see a US regime chainge faster than a lot here predict. Much
faster.
Passer by is correct, no doubt, thanks to incompetent leadership in the US, but this
economic horse race doesn't matter.
What matters above all is that nations should hold it together, "it" being sustainable,
survivable support systems capable of providing for mass populations.We have failed that test
here in our encounter with this pandemic. We have failed to develop a sustainable financial
system. We have failed to meet any sort of environmental goals. We don't even have
environmental goals! Our electoral system doesn't work, either, proof being the election of
this idiot atavistic rich boy. If anyone thinks the election of Trump reflects the will of
the majority of Americans, they are part of the problem.
China is in deep trouble. The CCP's greatest challenge is simply to hold "it" together.
The Party has to perform economic miracles or the country will collapse. Those groups not
satisfied with life in the PRC have no outlet for their voices to be heard. They cannot
protest. They are under the strict control of an increasingly sophisticated but tiny elitist
clique that is only 6.5% of the total population. This clique will not relinquish power and
permit more democratic expression. On the contrary, more and more suppression of dissidence
of any sort will happen. The social scoring system is an especially insidious program of
social control. China's collectivism has turned the country into an ant hill. It is extremely
productive, but people are not ants.
Passer by is looking at the world through a keyhole.
Nightmare' conditions at Chinese factories where Hasbro and Disney toys are made
Investigators found there were serious violations at the factories which were endangering
workers.
In peak production season, employees were working up to 175 overtime hours per month.
Chinese labour law restricts monthly overtime to 36 hours per month, but the report alleged
factories would often ask local governments to implement a "comprehensive working hour
scheme" to override existing legislation.
One wonders if China will run into the same problems of the US in the not too distant
future?
"The End of Sweatshops? Robotisation and the Making of New Skilled Workers in China"
Over the past four decades China has undergone a process of massive industrialisation that
has allowed the country to achieve remarkable economic growth. Because of its large
manufacturing capacity based on a seemingly unlimited supply of cheap migrant labour in light
industries, China has come to be known as the 'workshop of the world'. However, since the
early 2000s the country's labour market has experienced a remarkable transition from labour
surplus to a shortage of labour, which has led to sustained increases in the wages of
ordinary workers. In such a context, since 2015 robotisation has become a driving policy for
industrial upgrading for manufacturing in China, with the slogan 'replacing human workers
with industrial robots' (机器换人) frequently appearing in media
reports and official policy documents.
The early date of "full spectrum dominance" (1996 not 2010) suggests to me that the
doctrine was related the "end of history" thinking of that time. USA Deep State believed its
own propaganda.
It also strengthens my case for the proximate cause for the current conflict originating
in 2014 when the US Deep State suddenly realized the threat that Russia and China Alliance
posed to their plans for global domination.
Not only had they believed their own propaganda but they had overreached with their
attempt to force Russia to capitulate and had been distracted by Israel interests that wanted
to use USA for the greater Israel project.
When I wrote my economic analysis paper on China in 1999, it was quite clear that the 21st
Century was going to become the Asian Century as the Outlaw US Empire would be eclipsed by
Asia's economic dynamism. 20+ years later, my prediction holds true, and it's even stronger
now than then with Russia's resurgence. Both outcomes clearly go against the 500+ years of
Western Global Hegemony and goads numerous people. For students of history like myself,
what's occurring isn't a surprise thanks to the West's adoption of--or should I write forced
indoctrination into--the Neoliberal political-economic philosophy, which is akin to that of
Feudalism since it benefits the same class as that of the Feudal Era. China too was once
Feudal and suffered a massive Civil War that destroyed much of its structure, a conflict
known to the West as The Taiping Rebellion that lasted
almost 14 years, from 1850-1864. One might say that was the first half of China's overall
effort to overthrow Feudalism and Western Imperialism, as the second half began in 1927 and
finally concluded in 1949. That amounts to a large % of years for a newbie nation like the
USA; but for a nation like China inhabited by humans for over 1.3 million years and with
4,500 years of recorded history, it's really just another Dynastic Rollover--something
inconceivable to non-Asians.
In reality, China's a conservative nation, culture and society with a several thousand
year ethos of Collectivism, although that allowed a significant divergence in social
stratification due to the ruling Feudal ways. Those who have read The Good Earth have
an excellent grasp on the nature of Chinese Feudalism, which was embodied by the Kuomintang
or KMT--as with Feudal lords, KMT leaders were deemed "Gangsters" by US Generals and
diplomats during and after WW2. General Marshall wrote in 1947 it was clear to him that the
KMT would lose to the CPC, that there was no good reason to throw good money after bad, and
it would be best for the USA and the West to accept the fact of a Communist China (all noted
by Kolko in his Politics of War ). Contemporary China when compared to China as
depicted in 1931 by Pearl Buck is one of the most amazing human achievements of all time, and
the conservative Chinese government intends to keep it that way through a series of well
thought-out plans. That's the reality. It can be accepted and worked with as numerous nations
realize, or it be somehow seen as unacceptable and fought against in what will prove to be a
losing effort since all China need do is parry the blows and reflect them back upon its
opponent using skills it developed over several thousand years. It would be much easier to
join China than fight.
It's misleading to assess the National Military Capability of various countries in $US terms.
The West's M-IC is privately owned and puts shareholder profit before all else. And the
owners of the Western M-IC also own the politicians who facilitate and approve the rip-offs.
China and Russia's M-IC are owned and controlled by The People via the government and can
therefore get $2+ of value for every $1 invested. For example, one can buy some very nifty
twin-engine bizjets for less than half the price USG pays for a flying Batmobile (F-35) - a
glorified hot-rod with guns.
There is definitely a decline in the USA. Deaths of despair and from the coronavirus are
too great to ignore anymore. 150,000 dead and counting are not nothing. The Western Empire
has fallen. The U.S. federal government failed. The Imperialists are quarantined at home.
The question is if the 19th century North American Empire from Hawaii to Puerto Rico
survives. The Elite have bet it all on a vaccine or patentable treatment to give the
Pharmaceutical Industry billions of dollars. However, quick cheap paper monoclonal antigen
tests would make testing at home before going to work or school practical.
This would end viral transmission and the pandemic. No drug jackpot for the 10%. Instead
public health is ignored as Americans die. The silence is deafening. The protests in the
Pacific Northwest are not about slavery. They are about the 90% of Americans being treated as
disposable trash.
150,000 dead and counting are not nothing. The Western Empire has fallen.
No offense VV but I can't help thinking that you (and maybe some others) are talking past the
issue.
To be clear, the issue is this: Will the West's decline play a role in the US/Empire's
ability and willingness to confront Russia-China? Or is the oft-heard refrain that US/Empire
can not 'win' against China (implying that they shouldn't/won't bother trying!)
because of its decline (usually attributed to 'late-state capitalism') just wishful
thinking?
Virtually everyone here has agreed that the West - especially USA - hasn't fought the
virus correctly and with vigor. And virtually everyone agrees that there has been a relative
decline in USA/West and in some areas an absolute decline.
IMO what is ignored is that:
from the perspective of the US 'Deep State' or Western power-elite the failure to fight
the virus is a net positive if the repercussions are blamed on China (in addition to
other 'positives' from their perspective: saving on cost of care to elderly, boosting Big
Pharma profits, etc.) -
In fact, deliberate mistakes and mounting only a token effort (as we've seen)
is exactly what we should expect from a craven power-elite that want to further their
interests;
the overall decline, while troublesome - especially to the ordinary blokes who get the
short end of that decline - is not yet significant enough to prevent USA/Empire from
countering the Russia-China 'upstarts' aggressively.
I likened the hopefulness of the anti-Empire crowd about Western decline to their hopefulness
they previously expressed regarding Turkey. "Erdogan is turning east!" proved to be wrong.
Posted by: Andrei Martyanov | Jul 27 2020 19:01 utc | 14 Within last 10 years China built
surface fleet which in terms of hulls (and "freshness") rivals that of the US. US economy
would have it bottom falling off if it tried to accomplish a similar task.
Nice to see you here again. Yes, I mentioned the relative navy building in the previous
open thread. China's navy will exceed US capability by 2050 and be on parity by 2030-2040
according to reports I've read. That's just ten years to twenty years from now.
Result: US gets kicked out of the South China Sea and has to share the Pacific, Indian
Ocean (as will India with gnashing of teeth) and even the Med with China. China will
undoubtedly project naval power all the way to the Med in support of BRI in the Middle
East.
Posted by: Jackrabbit | Jul 27 2020 20:43 utc | 27 There is decline, and while it has been
mostly relative it is also accelerating - but that hasn't significantly constrained
USA/Empire's response to the upstarts.
I agree. US military power isn't going away in ten years or twenty. China may achieve
parity at some point (and can do serious damage now). But that doesn't obviate the fact that,
short of nuclear war, the US is still in a position to throw its weight around and will
continue to do so until forced back by a (hopefully conventional) military defeat of serious
proportions, i.e., not just "give up and go home". And economic woes won't change that as
long as the taxpayer can be fleeced - and they will be, for at least a few more decades.
@ 62 A.L. "Would it be a surprise to you than there are many many protests in China at the
grass root level everyday?"
There are indeed protests all the time, which is the fire under the local Party leaders
that keeps them dancing. Usually the protests are against local corruption or mismanagement
and are not serious. People can get what they want this way. Each year at the general Party
gathering, however, special note is taken of "mass incidents", that is, protests on a larger
scale, and overtly political events such as those in the Uighur province of Xinjiang and in
Hong Kong. Any protest that challenges the control of the Party is not permitted. The current
protests in the US could not happen in China because they challenge political orthodoxy. The
Chinese don't just roll over on command for the CCP to scratch their bellies and the Party
knows just how volatile the political situation could be if mishandled. China is developing
into the ultimate surveillance state. There are lots of Chinese like that little guy that
stood down the tank at Tienanmen in 1989. Eventually that guy is going to say: "There is some
shit I will not eat!" The Party knows this.
Several years ago (close to 10) I noted that the US would be bringing back US companies
from China, that it would actually subsidize their relocation. It's only logical. I saw China
as becoming hostile to US corporations: in light of how things are going today it's the US
govt becoming hostile toward US companies in China. Make huge profits and then get free money
to return back to the US: and be welcomed as victorious troops arriving back from some
glorious war.
It's Musical Chairs. As the music plays more and more chairs are being removed. Capitalism
has been the most efficient economic system in which to trigger an economic collapse. WTF did
people think would happen with basing economic systems on the impossible, basing on perpetual
growth on a finite planet. All of this was readily foreseeable using SIMPLE MATH.
China is in deep trouble. The CCP's greatest challenge is simply to hold "it" together.
The Party has to perform economic miracles or the country will collapse.
How do you square your dire prediction of China's collapse with the
Edelman trust barometer of 2019 (warning: PDF file), where China scores 88 on the trust
index and the US scores 60?
The COVID-19 pandemic revealed that all the "leading" western countries are unable
to handle even a relatively moderate public health crisis. The neoliberal economic model
considers any aspect of society that isn't generating a profit as ideologically unsound and
targets these areas for "reform" (i.e. privatization).
Sometimes this is done outright, as when a public utility or service is sold to a private,
for-profit operator (e.g. British Rail in the UK). But when the government thinks the public
will resist and push back it is done by stealth, usually by starving the targeted
service/organization of funds and then farming out parts of it to for-profit companies in the
name of "efficiency", "innovation", "resilience" or some other neoliberal doublespeak concept
(they all mean only one thing of course: PROFIT). This is currently happening to the US
Postal Service.
Every public healthcare system in the so-called "advanced" nations encompassed by the
EU/NATO and Five Spies has been underfunded and subjected to stealth privatization for
decades. Furthermore, people in neoliberal societies exist to serve as fodder and raw
material for "the economy" (i.e. the plutocrat or oligarch class) and there is no mechanism
to deal with emergencies that can't be milked for a profit. Hence, the half arsed,
incompetent, making-it up-as-they-go-along response to COVID-19 that simply writes off older
and sick people as expendable.
Neoliberalism began as a US/UK project, that's why poverty, crime, inadequate health care
and social services etc. and governmental and societal dysfunction generally is more advanced
there than in, say, Canada and Germany.
So, yes, the US is in decline, maybe even collapsing, but that doesn't mean the imperial
lackey countries are immune to the forces tearing apart the United States. They are just
proceeding down that road at a slower pace. If the US falls, the west falls...globalization
takes no prisoners.
I live in Canada where sometimes people get a bit smug about how great everything is here
compared to the US. In British Columbia, for example, opiate overdose deaths are at a record
high and have killed many many more people than COVID-19 since the pandemic began. Housing in
cities like Vancouver is increasingly unaffordable, there aren't enough jobs that pay a
living wage, permanent homeless camps exist in city parks, there are entire blocks where
people who live in their vehicles park etc.etc.
The reality is that it's the west that is in decline, not only the United States.
China is developing into the ultimate surveillance state.
Posted by: jadan | Jul 28 2020 1:30 utc | 95
But don't you see, dear jadan, it is for the good of the people, if only the rest of the
world could see the benevolence of Big Brother we would all be much happier at least that is
what the thought police has told me to think. One government, one heart, one mind. Long Live
the PRC revolution./s
Amidst all of the nonsense in the discussion section of the following link, I believe
there are some germane comments from individuals that work in the semiconductor space that
touch on some of the challenges China's chip industry faces. link
I hope their hiring of 3,000 experienced chip engineers accelerates their learning curve.
Developing a chip industry on a moment's notice, let alone competing with Samsung and TSMC,
is no small chore.
One item not mentioned in the above article is whether China could build many consumer
components based on domestic 14nm (or larger) technology. Given China used to spend more
importing chips than oil, I assume that even less advanced chips used for TVs, etc. as
opposed to cellphones, would be very helpful for China's consumer electronics
manufacturing.
They are also making some strides in the flash memory and CPU space, but production
quantities are still very low.
Health, education, infrastructure, research and development. The backbone of prosperity.
These will all continue no matter trade war or cold war but barring hot war. There must be a
doubling time for this - something like an R0. Cold war and sanctions will only serve to
increase R&D
US mistakes, hubris ect move in the opposite direction, mistakes multiplying
mistakes.
@Schmoe 105
thanks, interesting. Here is a complementary tho less detailed article on some of the same
topics I ran across recently: China Speeds Up
Advanced Chip Development [semiconductorengineering.com]
One important point, clearly visible in the tables in the seekingalpha article linked by
Schmoe, is that the ultra-small 14nm/7nm stuff is for specialized (but strategically
important) applications. Most consumer electronics, industry, and everything else is 40-60nm
and up, although of course smaller has benefits to older applications in improve power (i.e.
mobile applications and servers) and cost (higher density/wafer)
US as an one excuse for its current hostilities against China is 'intellectual property'
theft. Makes me think of ninja Chinese sneaking around removing peoples brains.
But back to semiconductors. One of China's biggest imports is chips, mostly made by machines
using US tech. Many industries are highly specialized and it often makes sense from small
community level to national and global level to by a product from those that specialist in
that product.
China has been content to buy chips, but that will now change due to necessity. Yankistan can
now expect to get its brains hacked, but I am also reminded of the Scientists in the
Manhattan Project being the ones to pass on much information to the Soviet Union.
Yankistan will be leaking like a sieve. I guess that's why both oz and the poms are beefing
up their secret police laws. Wont be long before we are getting shot trying to run through
checkpoint charlie to the free east.
It is clear that the US is in decline. It is clear the US military is bloated and
overpriced but it can still turn most countries into rubble (even without using nuclear
weapons) and has done a few recently. Mostly the US uses its reserve currency status and
control of financial networks to punish countries that do not go along with its program. Can
you say sanctions. but as Hemingway said about bankruptcy - it happens slowly and then all at
once - is probably how it will continue to go. It is even losing its technological advantage.
Boeing used to be the leader and made reliable planes. Now they sometimes fall out of the
air. Things like high speed railways used to be the kind of thing the US did well. Now
California can't get one built. China has built thousands of miles of them. Russia built a 19
kilometer bridge to Crimea in 2 years after 2 years of planning. It appears to be competently
built on time and on budget. Do you really think this could happen in the USA now? In the 70s
the US was the leader in environmental actions. I wonder if the present day Congress could
even pass bills comparable to the Clean Air ACT or the Clean water bill. US national politics
are a mean joke. Our choice this year for President - two 70+ old white men with mental
issues. Our health system is overpriced. Medical bills are one of the main reasons for
personal bankruptcies. As others mentioned the US life expectancy is falling. As Dmitri Orlov
who watched the Soviet Empire fail said - Empire hollowed out the Soviet Union till it
failed, I see it doing the same thing in the US.
The current 'adjustment' in the USD & living standards is just what the doctor ordered
to allow elites to roll out "tech wave 2" - there is precious little gain to be had from
further staffing & wages cuts to the average shit-kicker, so now the bourgeoisie,
medicos, architects, academics, writers plus all the rest of the tertiary educated types who
blew hundreds of thousands on an education guaranteed to keep them employed, are about to be
tossed on the scrap heap.
We already know from previous stunts such as 911 & the 2008 'global financial
meltdown' that those most disadvantaged by this entirely predictable destruction of lives
will be easily diverted into time-wasting and pointless arguments about the real cause
of the mess.
This will allow the elites to use that diversion to funnel all federal funds into
subsidising the capital costs of the retooling, as both parties have begun to with the
despicable CARES Act, supported by the mad christian right in the senate, as well as the
so-called socialists in the Congress squad.
All the Cares Act does is inject capital into big corporations, boosting their stock price
& leaving citizens to lose most of their unemployment benefit. Citizens get evicted from
their homes. This time it will be tenants as well as home owners.
Both of those factions of elite enablers are going to create a great deal of noise and
crass finger pointing. The squad will jump up and down about this being a deliberate attack
on citizens by the elite while senate fundies will claim that this 'retooling' is the result
of unreasonable pay & working conditions demands by the communist unions.
What should be a universal expression of disgust will be reduced to just another culture
war.
Neither will ever admit that it is far too late to be worrying about cause, it is time to
concern themselves with effect, because to do so would create focus back on where the money
was going at time when it is important to be saying "everyone is hurting, including the
elites". Fools.
Eventually when the deed has been done assorted scummy senators & creepy congress
people will announce "It is time to move on" That will be a signal that treasury tanks are
dry, the elites have gotten everything which wasn't nailed down so now the citizens can roll
clawing & scratching in the mud.
I have no doubt that will be the direction of discussion here as well, it is much easier
to sit at a keyboard digging out obscure 'facts' that 'prove' one point of view or another,
than it is to leave the keyboard behind and put work into resisting the elites and in doing
so forcing a change that is more citizen friendly.
With the return of Russia to the geo-political arena, US can no longer destroy counties at
will through conventional weapons nor color revolutions and AQ freedom fighters.
Trump decided to go nuclear, so Russia placed its nuclear umbrella over it allies.
US can no longer destroy countries at will. It can attack a country and risk ensuring its own
destruction.
So back to hybrid war and proxie war ... but now the field is narrowed down to five-eyes and
in the case of China - India.
So to keep Russia out, yankistan has to rely on conventional war and hybrid war, though we
are looking at a country where the lunatics are in charge of the asylum so anything could
happen.
The MNCs producing it, the MSS, NSA and GCHQ, the IoT idiots and all authoritarians on the
globe. Consumers are happy with 3G: many don't even have 4G reception - give that to
them.
With IoT more unemployment, more electricity and Internet dependency, more chance of hacks
or natural disruptions (solar flares), more 1984.
The Chinese Communist Party wants a tributary international system where smaller countries
are deferential to larger powers, instead of a rules-based international order where
small countries enjoy equal rights.
The US/UK declining won't bother most billionaires with those passports: they just buy any
other. Stuck are the millions of others.
Equally "China" ascending brings joy for all billionaires around the globe holding stock
depending on Chinese near monopolies, including Anglo-es.
Some middle class Chinese are beginning to see that dying "rich" is is very limited goal,
as zero can be taken to the Here After and the price for this Now is too high. Money is not
everything. Welcome to this select club, Chinese brothers and sisters. Sure, a bit is good to
live but amassing is a waste of precious time and attention.
The US lacks the capacity to erect an "economic wall" that can stop China's
development. Trump's "trade war" was an attempt to do just that, and America got
steamrolled.
To be sure, the US can attempt even more irrational and desperate acts such as trying to
seize assets owned by Chinese people and organizations in the US, but that would be America
shooting itself in the head rather than just the foot.
The US simply does not posses the ability to "take the wind out of China's sails" .
That is not something that is within America's power to accomplish without going kinetic by,
for instance, trying to enforce a naval blockade of China's maritime transport routes. At
this point there are no economic measures America can take that will not do vastly more
damage to America than to China. Both trade war and bio attack were the best options America
had, and America has suffered grievously from those efforts with relatively minimal impact on
China. China's economy remains fundamentally strong while America's economy is
devastated.
As for disrupting China's international development efforts, America has been trying its
hardest for years now with the only impact being minor delays in China's plans. The only way
to truly disrupt China's international development efforts would be to offer a better deal,
but America no longer has anything to offer that is better. The only option left to America
to delay the BRI for longer would be a kinetic one, and the door is closing on that.
from the perspective of the US 'Deep State' or Western power-elite the failure to fight the
virus is a net positive if the repercussions are blamed on China (in addition to other
'positives' from their perspective: saving on cost of care to elderly, boosting Big Pharma
profits, etc.) -
It will not be possible to blame China, simply because no one believes the US press any
longer, and there is no convincing the woman or man on the street that US handling of the
virus has been in any way competent. We may not understand its virulence, and we perhaps
don't understand yet how to cope with it, but the example of China has been clear from the
earliest moments, and that speaks louder than any false rhetoric can claim.
We know what we have been experiencing in comparison with others who acted with celerity,
and that basically was what was needed. The US chose to go it alone, at its peril. It stuck
by a set of rules it had made for itself in these last years - rules which have not benefited
the people at large. It all comes down to that.
I would not quote a Zionist dominated source like Wikipedia on anything politically
sensitive and the article you refer to is in any case 10 years out of date. However if you
read it it refers to two foreign-owned firms, and it mentions that there are (In 2010)plans
to double wages in the next ten years which has happened. The article also states"
Strikes are not new in China. Chinese authorities have long tolerated limited, local
protests by workers unhappy over wages or other issues.[40] The Pearl River Delta alone has
up to 10,000 labor disputes each year. In the spring of 2008, a local union official
described strikes as "as natural as arguments between a husband and wife".[41] The Chinese
government sought balance on the issue; while it has recently repeated calls for increased
domestic consumption through wage increases and regulations, it is also aware that labour
unrest could cause political instability.[42][43]
In response to the string of employee suicides at Foxconn, Guangdong CPC chief Wang Yang
called on companies to improve their treatment of workers. Wang said that "economic growth
should be people-oriented".[44] As the strikes intensified, Wang went further by calling
for more effective negotiations mechanisms, particularly the reform of existing trade
unions. At the same time, authorities began shutting down some websites reporting on the
labour incidents, and have restricted reporting, particularly on strikes occurring at
domestic-owned factories.[46][47] Guangdong province also announced plans to
"professionalize union staff" by taking union representatives off of company payroll to
ensure their independence from management influence.
Which indicates to me that the suicides alerted the government to the fact that
these firms were making the lives of their workers miserable and took steps to improve the
control of them. They obviously realized that the Union officials had been bought by the
management. I wonder how the British government or the USG would have reacted? What I am
certain about is that the MSM would have been much less enthusiastic about reporting it.
IMO, taking a good look at Brazil's situation provides close to a mirror image for those
within the Outlaw US Empire having trouble seeing clearly. Too often we forget to look
South at the great sewer and its misery US Imperialism's created. It may be getting
defeated in Eurasia, but it's winning in Latin America.
That sewer of misery was running full flush during Susan Rice's rise through the
ranks.
National Security Adviser to Obummer 2013 - 2017,
US Ambassador to the UN 2009 - 2013
Do read the rest:
And well beyond South America.
Now she is close to seizing the prize of VP to Biden. She is a iron war horse of
formidable capacity and mendacity given her past roles. She has few redeeming features. She
will conform exactly to the dictats of the permanent state and she will easily step right
over Joe Biden as he either falls or is taken down at the most opportune time.
What drole sense of humour thought of this - the hapless Trump squeezed between two black
American presidents. Seems like something the Clintons dreamed up.
"It was asked upthread if the US citizenry would trade its no-longer existing Superpower
status for decent living standards.... There're only two forces keeping the American people
from attaining freedom from the above fundamental fear and having lifelong security: The
Duopoly and its Donor Class, the Rentier Class of Feudalistic Parasites that are the enemy of
virtually all humanity."
The US citizenry will choose decent living standards in a heartbeat, but the present
arrangement for eating off the labour of deplorables is just too profitable for the Duopoly
& Donor Class to be permitted to change for a couple decades more.
Perhaps they will move on when there is no more meat on the American corpse, or when they
have built up a sufficiently large group of useful idiots in China to begin eating off the
backs of deplorables with Chinese characteristics.
Anything is possible, with the right amount of moolah, even overcoming Confucian morals.
Joshua Wong comes to mind, who not only does idiotic, but actually looks idiotic.
On the issue of the USD, Stephen Roach
also says that there will be a significant decline in the medium term. And the argument
is pretty logical - if the US share in the global economy is declining (and it will be
declining at least up to year 2060), and if the level of US debts is reaching all time high
levels, then the USD will decline. I agree with that argument. It is fully logical.
Quibble on the significance of US dollar; from the cited article "Roach is calling for the
dollar to soon decline 35% against its major rivals". That would take the EURUSD back to its 2008 high. Not something
that changes the balance of power.
But I think the rest of the story is true.
Certainly in the US we have everything we need to reverse our decline, build a better life
for everyone living here, and stop trying to "compete" by sabotaging everyone else. Sadly
zero sign of this being a priority on either side of the mainstream political spectrum.
If JP Morgan, Gold Sacks and other major asset managers are betting on this 'bear' you can
be damn certain that they are doing everything in their power to make it a reality. They will
shakedown every gutless, spineless politician/health official/scientist they can find to
ensure their profits keep rolling in.
Yes, the conclusion we must take from this crisis is that the USA (and most of the West,
if not all the West) is now declining in absolute terms, not only in relative ones. That's
what makes this 2020 crisis special for the time period analyzed.
Relative decline is nothing special for the Americans. During the High Cold War itself
(1945-1969), the USA itself declined relatively to Japan, which simply grew even more. You
can even talk about a relative decline in relation to Germany during the same period, at
least in some areas. The difference lied in the fact that Germany and Japan were minuscule
countries under full military control and were fellow capitalist nations. When necessity
came, the USA simply ordered both countries to value their currencies in relation to the USD
and decades of geopolitical gain evaporated in five years. This is not the case with
China.
But what fascinates me more is the flux of History. The USSR was better than China in
almost every single relevant aspect in the 1950s-1960s, but it lost the Cold War because it
had the bad luck to face the capitalist powers at their historical best. China, being much
inferior, is being able to gain terrain over the capitalist powers for more than 40 years and
counting for the simple fact they were able to survive and live to see capitalism in its
decline.
That's why Putin correctly stated the end of the USSR was the biggest catastrophe of the
20th Century. If it could survive for mere 17 years more, it would've lived to face
capitalism on all fours, after the 2008 meltdown, and get a second chance.
China, being much inferior, is being able to gain terrain over the capitalist powers for
more than 40 years and counting for the simple fact they were able to survive and live to see
capitalism in its decline.
Posted by: vk | Jul 27 2020 19:35 utc | 21
I would say it was that China began opening itself up more to capitalist oligarchs and
intergrating itself into the world economy beginning with the Nixon years. In particular the
western oligarchs shipping their manufacturing base to china. That cheap Chinese labor was
too hard to pass up.
The engine of capitalism is cheap labor, slave labor if possible.
Now China has a decent size consumerist/middle class which gives it the leverage along
with the manufacturing. It not magic
Exactly so. Anyone can massage those data points to say anything they want. And that is
precisely what's being done by the USG. Since admitting that they are in decline is a non
starter for them, these types of numbers are always trotted out. That isn't to say though,
that everybody isn't massaging their numbers as well to cast them in a shining light for
whomever the audience for which it is intended.
I cannot take seriously any analysis that suggests another crippled fiat currency will
somehow supplant the USD. The Euro? That is laughable. Cleanest dirty shirt analogy still
holds true. Look at Japan over the past 30 years of debt accumulation to see how long this
can go on. The yuan is no better given China's own debt frenzy since 2008. The only economy
that is structured to weather the next 20 years of decline is Russia with abundant land,
ample hydrocarbons, a functioning domestic industrial/agricultural base, effective military
deterrence, little debt and ample gold reserves. Putin is is far from perfect but he's done
an incredible job preparing his country for what comes next.
All fiat is set for a dramatic decline against real assets. You need only look at all fiat
currencies dropping against the price of gold which is a surrogate for all hard asset prices.
Dirty fiat shirts one and all.
You can also just search for the Kitco Gold-Currency Price page if you do not wish to
click on the shortened link (but I confirmed destination on checkshorturl).
It's no longer the grand chess board in Eurasia. It is now a whack-a-mole policy.
The hydra's head (BRI) that is flowing out of the dragon will be popping up here and there.
Wherever it does, it has to be whacked like a mole. There is so much whacking (no pun
intended) that can be done before the empire exhausts itself. In a logistics game, the empire
will always lose, to the local actor with enough resources to devour it.
We've also seen that other local actors /empire lackeys (I'm looking at you India) can't be
much help stopping the hydra either.
On Roach's comments, when a Yale University senior fellow and former Morgan Stanley Asia
chairman tells you that the USD is about to drop precipitously, you can bet he's working
behind the scenes to make that exact event happen. Of course it's logical. He's part of the
creation of the chain of logic.
Posted by: Anonymous | Jul 27 2020 18:48 utc | 9
Bingo! Engineered collapse under the guise of a fake pandemic.
Nice review. Recall Global Times reported China's GDP rose 3.2% in 2Q versus a 5-9%
drop for Outlaw US Empire. Also recall the need to deal with Real GDP, not the falsified
numbers provided by USG that count negatives as positives. The following are Shadowstats "Economic Headlines" :
"Second-quarter 2020 Real New Orders for Durable Goods plunged an annualized 55% (-55%),
down 22% (-22%) year-to-year / June Cass Freight Index® continued bottom-bouncing,
running counter to the 'recovered' Retail Sales / June Building Permits and Housing Starts
saw some rebound in the month having collapsed respectively at annualized rates of 56% (-56%)
and 76% (-76%) in the quarter / Not-credible inflation-adjusted headline June Retail Sales
recovered pre-Pandemic levels in a stronger than expected real 6.9% monthly gain (nominal
sales gain of 7.5% held just shy of recovery) / Contracting for the third consecutive
quarter, second-quarter real Retail Sales fell at a 24.2% (-24.2%) annualized pace / On top
of downside revisions, June Industrial Production gained 5.4% in the month, fell 10.8%
(-10.8%) year-to-year, with Second-Quarter 2020 activity collapsing at a 42.6% (-42.6%)
annualized pace, following a first quarter drop of 6.8% (-6.8%)."
From the sidebar comment of 23 July:
"Reporting of Deepest-Ever GDP Decline Looms on July 30th • Annualized 49.1% (-49.1%)
Quarterly Plunge in Household Survey Employed Was Consistent With a Real Second-Quarter 2020
GDP Annualized Collapse of 50% (-50%) and Year-to-Year Drop of 16.1% (-16.1%) •
Potential Third-Quarter 2020 GDP Annualized 20% Rebound Still Would Be Down 12.7% (-12.7%)
Year-to-Year, Rivaling Great Depression Depths and Post-World War II Readjustment."
Although it's yet to be updated for 2Q figures, here's the GDP
chart , which in Real Terms is worse than the blue line depicts
So, contrary to JR's assertions, the Outlaw US Empire is in economic freefall. And unless
the eviction moratorium is extended nationally, a massive crisis awaits as noted by the
article I linked to in the Week in Review thread. Add the fact that most of China's ASEAN
trade partners have recovered from COVID while BRI Eurasian projects continue, China's
economy will continue to grow, which is where its focus is at as reiterated almost daily by
China's media and reported here.
As for the US Dollar, this William Pesek
item reviews the many times it was predicted to drown but didn't, although this time may
be different:
"More recently, Stephen Roach of Yale University has hit the speaking circuit to argue
that the 'TINA defense' – 'there is no alternative' – is no longer operative.
"'If TINA is the dollar's only hope, look out below,' Roach wrote in a
recent Bloomberg column . 'America's saving and current-account problems are about to
come into play with a vengeance. And the rest of the world is starting to look less bad.
"'Yes, a weaker dollar would boost US competitiveness, but only for a while.
Notwithstanding the hubris of American exceptionalism, no leading nation has ever devalued
its way to sustained prosperity.""
There're others cited by Pesek who provide decent reasoning for downgrading the dollar
which he balances against past history, thus leading to this conclusion:
"Yet the risk of a reckoning is rising along with awareness of how the Trump era is
exacerbating all of America's imbalances, and creating new ones few could have
predicted."
What's certain--a great many US citizens are going to experience incredible financial pain
for a considerable length of time, which may or may not alter the basic political situation
within the Outlaw US Empire.
Absolutely false numbers since actual Chinese economy is much larger than American one.
With or w/o PPP adjustments. I would go out on a limb here and state that at this stage in
2020 real size of Chinese economy is about 2.5-3 times larger than that of the US. In other
words--it already dwarfs US economy.
Military budget (before Covid estimates, Trump budget) 2019 3,2 % of GDP - 2030 2,5 % of
GDP (Could drop to 2,3 % of GDP due to Covid)
These are also meaningless numbers since they do not account for actual military
capability, especially when based on a fraudulent US GDP numbers. Within last 10 years China
built surface fleet which in terms of hulls (and "freshness") rivals that of the US. US
economy would have it bottom falling off if it tried to accomplish a similar task.
Amid all the strange, alarming and exciting things that have happened lately, the fact that
real long-term (30-year) interest rates have fallen below zero has been largely overlooked. Yet
this is the end of capitalism, at least as it has traditionally been understood. Interest is
the pure form of return to capital, excluding any return to monopoly power, corporate control,
managerial skills or compensation for risk.
If there is no real return to capital, then then there is no capitalism. In case it isn't
obvious, I'll make the point in subsequent posts that there is no reason to expect the system
that replaces capitalism (I'll call it plutocracy for the moment) to be an improvement.
But first let's look at the real 30-year bond rate. The US Treasury is currently offering an
inflation-protected 30 year bond at a rate of -0.3 per cent. That is, if you buy the bond at
say, age 35, you can get your money back, less a 10 per cent reduction in real value, when you
are 65. This rate has fallen from 2 per cent, when the bond was introduced in 2010, and started
declining sharply in late 2018, before the pandemic, and while the Federal funds rate was
rising.
In thinking about the future of the economic system, interest rates on 30-year bonds are
much more significant than the 'cash' rates set by central banks, such as the Federal Funds
rate, which have been at or near zero ever since the GFC, or the short-term market rates they
influence. These rates aren't critical in evaluating long-term investments.
The central idea of capitalism is, as the name implies, that of capital. Capital is
accumulated through saving, then invested in machines, buildings and other capital assets to be
used by workers in producing goods and services. Part of the value of those goods and services
is paid out as wages, and the rest is returned to capital, as interest on loans and bonds or as
profits for shareholders. Some of the return to capital is saved and reinvested, allowing
growth to continue indefinitely. Workers, on this account, can become capitalists too, by
saving and investing some of their wages. At a minimum, they should be able to save enough,
while working, to finance a decent standard of living in retirement.
But what happens if there is no return to capital? The collapse of interest rates on
government means that's already true for anyone who wants a secure investment. And the
situation isn't any different for the two remaining AAA-rated corporate borrowers, Microsoft
and Johnson and Johnson. Microsoft is currently offering a rate of 2.5 per cent on 30-year
bonds, and has exchanged lots of outstanding debt for new bonds at that rate (paying a 40 per
cent premium for higher-interest bonds). That's a real return of 0.5 per cent if you assume
that the Fed sticks to its current 2 per cent target and hits it on average. (There's a lot
more room for inflation to surprise on the upside, in my view). If you allow a 15 per cent risk
that Microsoft will go bankrupt some time before 2050, the expected real return falls to
zero.
To complete the picture of returns to capital, we need to look at stock markets and
corporate profits. That'll be the subject of another post.
John Quiggin 07.26.20 at 3:32 am (no link)
It's tempting to link all of this to the long-term historical decline in interest rates
that led 19th century economists, most notably Marx, to talk about the declining rate of
profit. But that decline came to an end in late C19. Real interest rates bounced about in the
20th century with no obvious trend. Much of the earlier decline may be have been due to a
reduction in default risk as capitalism became established, but that's just speculation on my
part.
Also, I plan to talk more about Keynes' thoughts on the euthanasia of the rentier, which
seems to be happening, although without much in the way of anaesthesia.
There is capital and then there is capital -- calling different things by the same name to
avoid (!?) confusion.
The process of capital investment -- using money to mobilize resources to strategically
alter the costs of production well in advance of sale or consumption -- that process has
always depended directly on the ability to assemble and exercise essentially political power.
There is nothing pure about it, and nothing at all, should you exclude any return to monopoly
power, corporate control, managerial skills or compensation for risk. The most substantial
returns from capital investment are only available to the fount of political power, the
state. The debility or senility of the state as provider of public goods might have something
to do with the inability to earn a return on investment.
Money, qua money -- "wealth" of the purely nominal sort unrelated to mobilizing resources
to productive purpose -- has only one purpose: insurance. "Insurance" in this very broad
sense can include cruel uses of money, facilitated by deflation: usury, debt peonage -- even
the words are cruel.
Central banks have been trained to flood the markets with "liquidity" to stave off the day
of reckoning for fraud and foolishness. It is as if the want to prove every bad thing the
Austrians ever said about them.
The true heart of capitalism is "other people's money". Borrowing money to lend money. For
this purpose, there is no one interest rate. There is borrowing at 0% to lend at 27% or 400%
or whatever horrific rate can be baked into a private equity deal or some crazy scheme of
insurance bound to drive up the cost of whatever services the purchase of which they finance
parasitically.
Hidari 07.26.20 at 9:10 am (no link)
If anything, this understates the matter, and understates what extraordinarily unusual
times we live in.
According to this site (and yes, it looks a bit dodgy, and no I have no idea who these
people are, so caveat lector) interest rates are the lowest, worldwide, generally speaking,
than they have been in 670 years.
This other dubious site makes the even more dubious claim (based on rather questionable
evidence), that current world wide interest rates are the lowest they have ever been
.
The first site suggests some opinions as to why this might be the case (assuming it is the
case), which I lightheartedly put forward as semi-serious 'solution' to this mystery.
1: Productivity Growth. As everyone has noticed, in the 'advanced' capitalist states,
productivity is dropping, as is 'inventiveness' broadly defined (this can be measured by
patents). Have you all noticed that when you were growing up, there was a life changing
technology development almost ever year or so, and since the development of the smartphone,
it's all basically stopped? (Electrification of existing commodities, e.g. cars, don't count,
and nor do things that don't exist and which will never exist, like genuinely self-driving
cars or moonbases/trips to Mars). CF John Horgan's The End of Science, and the concept of
'low hanging fruit' which all seem to have been pretty much picked by now. No new products
means no new firms to sell them, means less tax money, means less growth.
2: Demographics. Some 'optimists' have predicted that population will begin to drop this
century. Even assuming they are correct, which is dubious, have you ever considered what that
means? Old people are more conservative than young people, less productive, more sick, need
more care. Ageing societies are not politically liberal vibrant societies. What we are likely
to have is the worst of both worlds, in which population continues to increase for the next
few decades in the Global South, increasingly ravaged by climate change, and drops in the
Global North, meaning more conservatism, more Trumps, more of a 'gerontocracy', and of course
whipping up hostility to immigrants facing their burning countries might keep them in
power.
3: Economic Growth. Capitalism needs new markets, and now, as Branko Milanovic has pointed
out in 'Capitalism, Alone', there are no new markets. Everywhere is capitalist so there are
now no mechanisms available to 'pump prime' growth. There's no new source of cheap labour, no
new source of new consumers (China previously supplied that, keeping the global economy
booming in the 1990s and until 2008 but that effect seems to be failing).
Also, of course, climate change, the 'death of birth' the ongoing ecopalypse etc.
So, by the mid to late 21st century (science fiction, prediction alert!), negative
interest rates might be the norm. Indeed, this has already begun in Japan, which in many ways
shows the way ahead to our future: an ageing, conservative, sick population, in a low growth
country, where there is very little political or cultural change for decades, and where the
major political 'debates' are how best to keep out foreigners.
As John will presumably go onto argue, this will more strongly resemble societies from the
ancient world more than post-Renaissance capitalist societies, with gigantic inequality,
little scientific or economic growth (or change), huge swathes of the population kept
controlled and constrained via debt peonage (a sort of modern feudalism), increasingly
hollowed out and pointless 'democratic' polities, and real power remaining with a de facto
aristocratic class who made their money by inheriting it and kept it not by building things
and making them, but by tax dodging and other 'financial' tricks, in a mediatised world that
spends billions persuading the populace that none of this is happening (this is essentially
the story of Trump).
It seems to me that you are talking from the perspective of the financier, or saver, who
buys bonds and receives little, no, or negative return. But the capitalist is a
borrower, not a saver; a seller of bonds, not a buyer of bonds. She borrows money in order to
make investments in productive, as opposed to financial, capital.
So low interest rates suit the capitalist just fine. What can be a problem for the
capitalist is a low return on investment. Low growth – which we also have in the rich
economies – is therefore a problem for capitalism because it tends to imply a low
average return on investment. But in a world of zero interest rates, of course, you only need
a minimal return on your investment in order to make it profitable. So capitalists and
capitalism are still doing fine.
Put another way: when talking about 'the return on capital', at a minimum we have to
distinguish between the return on financial capital and the return on investment.
Final note: as you know, Larry Summers and co-authors have been writing about the secular
decline in interest rates and its causes for a few years now, as part of the discussion of
secular stagnation.
Will somebody finally admit that the Washington consensus (that a policy mix consisting of
tight fiscal policy and loose monetary policy) has been failure, on it's own terms. All it
has done has inflated asset prices to such an extent that nobody trusts their value (hence
negative expected return).
Secularly increasing the level of private indebtedness doesn't make the system more
resiliant. When you express it in those terms it sounds ridiculous, and yet that is what has
been official policy for thirty years.
We need to be aiming ot increase government debt at a rate sufficient to maintain the
money supply and should be aiming to gradually reduce the level of private indebtedness.
I need to make my macro policy ideas more complete I think before people misunderstand
what I mean.
We need
1. to run moderate deficits and securarly monetarise at least a significant fraction of
them
2. actively redistribute income
3. remove the tax incentives encouraging debt over equity
4. discourage speculative lending on a no redemtion basis (especially lending to risky
debters on the basis of expected asset inflation).
Tim Worstall 07.26.20 at 10:32 am (no link)
I think it's Tyler who says never reason from a price change?
"But first let's look at the real 30-year bond rate. The US Treasury is currently offering
an inflation-protected 30 year bond at a rate of -0.3 per cent."
How about a minor corollary, be careful of reasoning from a manipulated price?
What is the purpose of QE? To lower the risk free interest rate. We've a lot of QE at
present – some $7 trillion on the Fed balance sheet, something like that? That risk
free rate is definitely manipulated.
We can, of course, assume that the manipulation is going to last forever. But that would
be a strong assumption. If we're trying to think about the underlying structure of the
economy, rather than the current surface state of it, perhaps we might want to consider what
the risk free interest rate would be without the manipulation. What would the 30 year
inflation protected bond be paying in the absence of the $7 trillion of QE?
At a guess I'd say rather more than it currently is. Which is the same statement as QE
works at its declared aim. It being that absenceofQE interest rate that should inform this
speculation about capitalism.
Capitalism, briefly described, is the 'the rewards of saving, organized' or 'the principle
of indefinitely deferred consumption.' Everything else is the results of that. If you
repudiate that completely – then what are the implications? In the extreme, everyone
must consume everything immediately. One major motivation for this is that if nothing lasts
or is at high risk of being confiscated – in infinite regress.
"The central idea of capitalism is, as the name implies, that of capital. Capital is
accumulated through saving, then invested in machines, buildings and other capital assets to
be used by workers in producing goods and services. Part of the value of those goods and
services is paid out as wages, and the rest is returned to capital, as interest on loans and
bonds or as profits for shareholders. Some of the return to capital is saved and reinvested,
allowing growth to continue indefinitely. Workers, on this account, can become capitalists
too, by saving and investing some of their wages. At a minimum, they should be able to save
enough, while working, to finance a decent standard of living in retirement."
Sentence by sentence
" central idea " is not capital, I think, but capital markets. Perhaps a subtle
difference, but important nonetheless. Capital in this sense was held by Roman bankers I
think.
" capital is accumulated through saving " Historically capital was accumulated by robbery,
taxation, expropriation of church lands, state efforts to create currency -- accumulate gold
-- and a national market. Currently, capital is largely credit, from central banks, ordinary
banks and shadow banking institutions too numerous to name.
" invested in machines, buildings and other capital assets " I do not think a medieval
lord building a water mill was doing capitalism nor a central bank isn't. I don't think a
peasant in Tang China was doing capitalism nor do I think a George Washington buying property
claims on the frontier wasn't.
" Part of the value of those goods and services is paid out as wages " The labor is
borrowed first, then paid later. Currently that's usually two weeks later, but it has been
quarterly or even annually if I remember correctly.
" the rest is returned to capital, as interest on loans and bonds or as profits for
shareholders." Interest long predated capitalism so it's not even clear how this relates. But
if it does, interest historically was a kind of guaranteed profit, where risk was annulled by
a property claim in default of re-payment. But if memory serves, there were capitalist
enterprises predating a shares market, called partnerships, where ownership of the enterprise
and the ongoing profits may be conceptually distinct but weren't in practice.
"Some of the return to capital is saved and reinvested " Credit. Also, the difference
between a peasant saving and buying the neighbors' land when they fall on hard times is
different from a Rockefeller buying oil companies, much less a mutual fund buying stocks.
" allowing growth to continue indefinitely." In a fully developed capitalist economy,
growth is never indefinite, but always goes in cycles. If physical plant was a destructible
as money, stocks, bonds, etc., humanity might be back in caves?
"Workers, on this account, can become capitalists too, by saving and investing some of
their wages." A practical definition of capitalist would be someone who someone who invests,
in a factory or a hedge fund, to make a profit. There is a difference between a worker who
buys a house to live in and a capitalist who buys a house to rent out.
"At a minimum, they should be able to save enough, while working, to finance a decent
standard of living in retirement." This is a kind sentiment, which I approve. But given that
capitalist countries like imperial Britain in the nineteenth century did not provide enough
food for the majority of the working class to reach modern-day stature, this doesn't seem to
have much to do with economics. Pious wishes are not useful analysis in my opinion.
Anyone who actually read may think, quibble, quibble, quibble. But framing the issue like
this is misleading I think.
Normally (by which I mean during booms) in a capitalist economy part of aggregate demand
comes from net investment.
Continuous net investment requires more and more workers, which lowers unemployment and
increases the wage share; at some point profits fall too much, capitalists stop investing but
they don't buy consumer goods either, so this causes a paradox of thrift effect and a
crash.
The specific level of wages where this happens is not fixed though, and in recent times the
wage share fell throughout the cycle.
This means that through the cycle and even towards the peak the profit share is quite high,
but since capitalists don't want to invest in real capital anymore they invest in speculative
capital like houses, bitcoins etc..
Speculative capital reacts to increased demand in terms of price instead than in terms of
quantity (in the 19th century this speculative capital was mostly land), so as the profit
share increases throughout the cycle the wealth to income ratio increases. This increased
wealth with fixed income necessariously lead to lower returns on wealth (note, on wealth, not
on physical capital, as the profit share is still high).
This bubbly effect is needed to keep demand up so the government has to get along (e. G. If
the fed increased the interest rate now it would cause a huge crisis).
This is not really different from what happened pre WW2; IMHO it is just a consequence of the
winding down of the new deal, that caused the wage share to fall.
@Tim Worstall
We don't know what the "natural" interest rate would be, but my understanding is that the fed
can only push the interest rate up, not down.
In the end the interest rate reflects the expected return on new investment, but if nobody
wants to invest that rate is 0?
J-D 07.27.20 at 4:53 am (no link)
There's production of real goods and services, and then there's money. The relationship
between the amount of the first and the amount of the second is not straightforward, nor
even present in many cases (eg the roughly half of production that takes place in the
non-monetised sectors of the 'economy').
I'm not sure what difference it makes to your general point (maybe it makes none), but
since you refer in that easy way to 'production of real goods and services', I want to point
out that there's production of goods and then there's production of services.
Consider, as one example of each category, candles and haircuts.
Candles can be produced without being being consumed. The production of candles can easily
be understood as distinct from the consumption of candles. Some candles get produced and then
never get consumed. It makes sense, when referring to a business which sells candles, to ask
how many candles it has available for sale.
Haircuts cannot be produced without being consumed. The production of a haircut and the
consumption of a haircut are most easily understood as being the same event. It does not make
sense to refer to a haircut as produced but not consumed. It does not make sense, when
referring to a business which sells haircuts, to ask how many haircuts it has available for
sale.
Paul @7 A capitalist is an owner of capital: therefore a direct investor or lender.
Someone who operates on borrowed capital, seeking a profit over and above the market return,
is an entrepreneur. This, at least is the standard terminology.
In the standard classical or neoclassical model, the super-profits of the entrepreneur are
ultimately competed away. The things that matter, in the long run, are labour and
capital.
Risk and uncertainty change this, and I'll talk more about that soon.
Tim W. If the central bank can determine the rate of return to capital indefinitely into
the future, capitalism really is finished. The point of QE was to reduce short-term rates in
the emergency conditions of the GFC, The emergency has now become permanent, it seems.
@20 "If either US party genuinely cared about innovation or small businesses as the engine
of growth, we'd have had universal health insurance, "
A point Dean Baker has been making for many years. Although it's not quite as slam dunk as
he puts it as being. The US has a low rate of new business formation as a whole. And a high
rate for businesses designed or funded to expand into reasonably sized workforces. The bit
the US is missing is the small company that opens as and intends to remain small.
Which rather supports Baker's point actually. As such larger, better funded start ups etc
will have the money to be able to provide health care. In a manner in which the one man bands
the US is deficient in don't.
@25 " The point of QE was to reduce short-term rates in the emergency conditions of the
GFC,"
We seem to disagree on that point. The traditional tools work rather nicely in determining
short term interest rates. We do, generally, say that the central bank controls them after
all. It's the longer term that is more market influenced and that longer term that QE was
aimed at.
"If the central bank can determine the rate of return to capital indefinitely into the
future, capitalism really is finished."
And this:
"Amid all the strange, alarming and exciting things that have happened lately, the fact
that real long-term (30-year) interest rates have fallen below zero has been largely
overlooked. Yet this is the end of capitalism, at least as it has traditionally been
understood. Interest is the pure form of return to capital, excluding any return to monopoly
power, corporate control, managerial skills or compensation for risk."
It poses a difficulty, perhaps a decisive one, for investment, yes. But investment and
capitalism are not synonymous.
Well, assuming that we agree on hte following. A workers' cooperative is not capitalism.
Do we agree? But a workers' cooperative faces all the same decisions about how much of
current income should be put by for investment in future production and output. That it's the
income of the workers making the decision doesn't change the difference that the absence of
interest makes. It's still the same change in how much be given up now in order to gain
whatever in the future.
Investment, that is, not being the defining feature of capitalism. So changes in the terms
of investment don't, to me at least, seem to kill it off. Whatever it is that will be changed
is much wider than capitalsim – it would seem to be the terms of investment in whatever
socioeconomic system we've got.
As to what is the defining feature of capitalsim I take that to be that the investors
– the capitalists – are not part of whatever organisation is being invested in. I
don't see a zero interest rate as changing the desirability – say, investor
diversification, possibly limited liability, the possibility of mobilising the assets of tens
of thousands, millions, into a project – nor the undesirability – anomie and all
that of capitalism.
A zero interest rate changes all calculations about investment, not merely capitalist
ones.
@
"To complete the picture of returns to capital, we need to look at stock markets and
corporate profits".
and at some "Capitalists" – who always look at the whole "Picture" in order to only
play only the Casinos which offer the highest returns.
Like "the Stock" or the Real Estate Casino – and as the Real Estate Casino is
tanking BIGLY again -(even more "bigly" than in 2008) – there are only Stocks (kind of)
left –
and if – there – the gamblers will realise that the Party is over – too
– soon "the Utmost Clever Capitalist will have to go back to the "Liquidation Casino"
where y'all get EVERYTHING "for peanuts" – (Bugattis – Ferraris – Golden
Toilets – Whole Hotels and Casino – some tacky Chandeliers) – from the
STUPID -(and overextended) – Capitalist – like Trump.
As I hope that everybody here knows – that Trump already is bankrupt and after he will
be send back to golfing – he will have a very difficult time – finding one of his
golf courses – who still is profitable – and where his employers don't stare at
him – when he cheats – and behind his back tell each other:
"There golfs the Cheating Loser".
AND nothing – NOTHING hurts a Capitalist more -(besides losing all of his Capital)
–
than considered to be a really bad golfer!
One of the most frustrating aspects of any discussion of capitalism is that no two people
seem to mean the same thing with that term. The most common equivocation is, of course, its
redefinition into free markets plus democratic elections, cleverly allowing the No True
Scotsmanning of anti-communist dictatorships and monopolies as "not capitalism at all" and
enabling the person using this definition to tally the victims of capitalist expansion up to
a nice round zero.
To me, capitalism is a system where a minority of people own the means of production, and
the rest are legally free but forced to sell their labour to the former class to earn their
living. A few decades of very poor returns on bonds does not mean that there is a new system
of "no capitalism" with social arrangements as comparably different to capitalism as the
slave economies of antiquity, tribal societies, or Medieval feudalism, just as not having
free elections does not change the economic system into "not capitalism".
Regarding the reason for low returns, I get the problems of constantly reinflating
bubbles, but I would take one step further back and ask why they exist in the first place
when they had not existed for several decades c. 1940-1980ish. It seems to me as if the
underlying problem is low wage growth and inequality. It is a situation of too much money
sloshing around in the hands of billionaires and large companies, desperately trying to find
some worthwhile investment opportunity but coming up largely with (1) loaning it out or (2)
chasing speculative bubble after speculative bubble.
Why? Because most of that money is NOT being moved through the hands of the working class,
who therefore cannot buy enough stuff, and therefore investment into producing additional
stuff for the working class is not profitable. Too much money is constantly extracted from
the economy, so the economy regularly stalls and has to be kept from crashing by the next
injection of new money. But that injection goes to those who have enough money already to
lobby for getting more, and only rarely to those who would immediately spend it on a new car,
renovations, travel, clothes, better food, etc., so the downward spiral continues. (I see
that MisterMr has expressed a very similar view.)
But even if that were all resolved by returning to an economically sustainable high tax,
high wage system, we would next have to talk about sustainable consumption and limits to
economic growth.
So: what Hidari said, only I would use more present tense than future.
Climate change is now. Population grows and aging populations in one place combined with
too many young people with too little water and fertile land in another place is now. Very
nearly the whole world already having been turned into capitalist market is now.
Perhaps most importantly, because it is what stands in the way of solving any of these
problems: the malaise of contemporary politics in the richest countries seems to be precisely
that it is dominated by well-off retirees who more reliably vote than young and poor citizens
and who very reliably vote conservative. And it is not even only voting. When I was a young
adult in my home country I was very politically active. As I remember our meetings, the local
SPD (~labour) chapter was 2% young, progressive activists, 18% teachers and public servants
in their 50s, and 80% pensioners who would reliably elect the most conservative of the second
group to be chapter president, mayoral candidate, etc. The composition of the Tory party
membership in the UK is another case in point, as is the primary electorate of the two large
parties in the USA.
We are living in the world Hidari envisions for the second half of the century.
Lee Arnold,
I am a bit puzzled by your point "Regulations, zoning, government control, unions,
socialization of private financial losses, rent-seeking ("socialism" in the current
parlance)". Union power is at the moment extremely weak, and while the other factors are
stronger you are mixing extremely different things into one. I don't understand, for example,
how socialisation of losses would inhibit innovation, as it would allow an investor to take
more risks without going broke. Conversely, "regulations" is the exact opposite in that they
aim to keep investors from socialising losses.
I'm just curious why nobody addressed this sentence:
"Secularly increasing the level of private indebtedness doesn't make the system more
resiliant. When you express it in those terms it sounds ridiculous, and yet that is what has
been official policy for thirty years."
Are you all missing the wood for the trees? Seems to me everybody is looking for something
complicated when it is staring them in the face.
Pointing to negative interest rates on 30-year Treasuries doesn't mean that "capitalism"
is over. Capitalism is a whole series of political acts (laws, regulations, incentives) that
force the population to behave in a certain way. None of that has gone away, despite low or
negative interest rates. If you doubt it, note that–at least in the
USA–bankruptcy courts are about to have a world-historical run, dealing with an order
of magnitude increase in business and personal bankruptcy cases. How will society handle the
"social costs" of Covid-19? By putting people through a legal proceeding that largely imposes
those costs on those directly involved–because in the USA the legal system (AKA the
"real capitalism") absolutely believes in atomistic individualism, and all the manipulations
of the Federal Reserve do nothing about any of that.
What this does show is that the economics profession as a ridiculous
tendency–without which it would collapse back into the more realistic subject
"political economy"–to try to focus on "the economy" as if that were an entity
completely divorced from, independent of, and possibly epistemically prior to the
political/legal framework surrounding it. In the economics profession, an awful lot of work
is done by the phrase "all else being equal," where the most important causal
pieces–which are political–are studiously ignored.
@
"–at least in the USA–bankruptcy courts are about to have a world-historical
run"
and this morning I went through Stresa – where. it doesn't look a lot better
–
BUT in between all the emptiness and the closed symbols of Capitalism there was one
infinity pool – absolutely BEAUTIFUL -(as Trump would say) – with a BEAUTIFUL
view over the Lake and not a chaise empty – and when I came back to the Isola Pescatore
there wasn't a place empty at lunch – with all the usual joyful Lunchers from the
Homeland Italy and Switzerland, France, Germany – and I even saw an Old Dude with a
Oxfors University T-Shirt.
AND the two Mahogany Rivas in Front of the restaurant proved that Capitalism isn't dead
(yet) and that it will take a lot more to kill at least "Italian Capitalism".
John: It's not an easy step to equate long-term bond rates (e.g. the 30-year Treasury) to
overall capitalist profits. According to Dead Bearded German Guy Who Must Not Be Named in
Economics, the following is incorrect:
"Interest is the pure form of return to capital, excluding any return to monopoly power,
corporate control, managerial skills or compensation for risk."
Interest, monopoly power, corporate control, managerial skills, and compensation for risk
are determinants of profits from the point of view of individual capitalists, but Marx would
stress that these are superficial aspects of capital and that what matters in the end is
first, surplus labor converted into surplus value, and second the ability to realize surplus
value in a macroeconomic setting. Interest, dividends, rents, plus corporate profit and
proprietor/partner income taxes are all redistribution of surplus value according to him. I
am not in full agreement with Marx, as I think resource extraction and non-human labor are
also sources of economic surplus, but that is tangential to this point.
I would argue that the downward trend in long term interest rates over the past decade is
caused by an increased realization difficulty. Part of this difficulty is under-consumption:
the wage share of income has fallen over the past two decades, real median incomes have been
stagnant and in many regions real incomes lower than the median have fallen. The only way to
prop up consumer spending in such an environment, especially spending on longer-term durable
items such as houses and cars and longer-term intangibles such as education, is to have lower
interest rates.
Second, the falling long-term rate may be indicative of what some macroeconomists call
secular stagnation. As in perceived higher risk for investment projects due to lower
productivity growth (in fact, the main driver of equipment investment is to ratify new
technologies: potential productivity growth drives investment which drives actual
productivity growth). With low potential productivity growth, perceived investment projects
are riskier, causing a greater balance of capital to move to safe assets -- Treasuries --
thus driving down the T-bond rate.
What drives potential productivity growth is a black box, but the simplified heterodox
economics argument is that strong aggregate demand correlates with strong consumer spending,
which correlates with high relative wage costs, which correlates with increased productivity
gain searches looking for either Fordist or Marx-specific (i.e. labor-saving) innovations, or
niche-specific productivity gain searches where increased use-value for new commodities
translates into increased nominal productivity.
Overall, a Marxist or Marx-influenced economist would point to the low labor share as
pulling down productivity growth and thus pulling down long-term interest rates for safe
assets such a Treasuries, whereas a secular stagnation analyst would point to the lack of
epoch-making innovations (e.g., the end of geographical widening and capacity increasing for
electronic technologies as opposed to data processing deepening) plus reduced business
confidence in the post-2008 period and reduced global financial confidence in quick-flowing
capital post-1997 as depressing business investment and thus pushing down on safe asset
interest rates. The two explanations are not mutually exclusive.
None of this should point to either a coming end to capitalism or to Keynes's fairy tale
euthanasia of the rentier; as long as there is capitalism (and possibly even after
capitalism) there will be rentiers. But the trend in interest rates does point to the need
for global capitalism to have a new regime that discards neoliberalism. Low interest rates
correlate with stagnant or even falling real labor income, which correlates with populist
demagogy and increased international instability. Only when the international and domestic
political instability is sorted out is it possible to shift back to a non-neoliberal
capitalist regime and to usher in another 1945-1970 type growth period in which rentiers are
subdued but definitely not euthanized.
This is somewhat teased by JQs last comment up above, but real 30Y rates are not below
zero. Real rates including the risk and liquidity premium attached to Treasuries are below
zero and that's a different thing entirely.
From an investment market perspective – which is what's being measured in the rates
JQ cites – ever since Dodd Frank there has been an actual scarcity of UST paper of most
kinds. That seems hard to believe in the context of +20T of government debt, but in fact from
a supply/demand standpoint there is not near enough.
The reason is various collateral and settlement requirements imposed on banks post GFC. It
used to be that collateral was anything a counterparty was willing to accept, now its only
government paper – full stop. Accordingly the +$20T of debt (not all of which is held
in a way that can be used as collateral) is collateralizing several times that amount of
commercial and personal borrowing.
When economies grow the demand for Treasuries rises. When the economy contracts
uncertainty rises, demanding more collateral and increasing the demand for Treasuries. There
is no steady state that produces a liquidation. This is what 50bp of US10T means to the
investment markets and why its probable that it will eventually hit zero.
Whether that spells the end of capitalism or not seems dubious since JPM, Goldman, Citi et
all seem to have several Trillion of capital and lending acitivity that suggests things are
just fine.
Finally, as a practical matter, there is an over-abundance of money or money like
instruments. Everything from Bit-coin to collateralized debt all is available to fund the
capitalist, the entreprenuer, idiots and fools. This is what will end badly – not
government debt at Zero real coupon.
When reading about the past, present, and anticipated development of our political
economies, I have taken to substituting the neologism "Investorism" for "Capitalism." Marx
lies decades back in my reading, but I remember him saying that he was describing social
systems. Not religions or ideologies, except as they functioned in social systems. Capitalism
/ Investorism is the social system in which private investors – who, per #27, "are not
part of whatever organisation is being invested in" – call the shots. That the interest
rate has dropped below zero has many implications, many of which are opaque to me. But I
expect that the investing class is going to have 90% of the input (and a veto over) the
responses
I don't think I understand capitalism more than superficially. And as both the OP and the
comments demonstrate, neither does anybody else. I think nobody really has much of a clue,
neither the capitalists, the bankers, the Corporate Leaders, the economists, nor
unfortunately the anticapitalists, socialists and anarchists.
I was trying to make a comprehensive list of all of the reasons, given by both the left
and the right, for the perceived lack of jobs and business opportunities, despite the decline
of interest rates since around 1980. Whether the reasons are logical or not. So I gathered
disparate and opposite reasons under broad categories. Safety nets (Fake Dave #30) is a good
addition to the list: the left says we need them to reduce risk, the right says they slow
down growth.
Labor unions, always blamed by conservatives for impeding business, saw a decline since
around 1980 but of course their decline did not increase the rate of business startups.
Public sector unions are still under attack today for making government "inefficient" thus a
presumed drag on growth and opportunity. Libertarians e.g. Rand Paul even blame the
socialization of losses: I don't understand that, any more than you do. (Although they
scarcely practice what they preach.)
My point is that I don't think that any of the reasons, nor all of them together, will
explain what has been going on for 40 years. If you smooth out the graphs of 10-year, 30-year
Treasury rates and new business formation since around 1980, the declines look almost linear.
Maybe capitalism has been massively successful, so successful that it is putting itself out
of business, and we are growing out of it, just like Keynes and Schumpeter said we would.
While we are sorting it out, I would suggest creating a government monopsony that
guarantees human needs which will still allow private entrepreneurialism for innovations.
Not being an economist of any kind I can only offer my 2 cents worth for consideration.
There is so much money floating around in the upper reaches of the economy that interest
rates are of little concern to its denizens. Their problem is one shared with drug dealers;
where do you stash your money to keep it safe? Investing in zero or negative interest bonds
is like paying a small fee for a safety deposit box for your valuables. Having more money
than you could possibly spend makes it reasonable to buy luxury real estate and let it sit
empty. Property taxes and maintenance represent negative cash flow, but who cares?
@37
"I don't think I understand capitalism more than superficially. And as both the OP and the
comments demonstrate, neither does anybody else".
Hey!
I did – as I read the definition of "Capitalism" before commenting – and as the
definition says:
"An economic and political system in which a country's trade and industry are controlled by
private owners for profit, rather than by the state".
AND the Virus now made sure that even in the utmost "capitalistic" countries "the economic
and political system" HAS to be controlled by "the state"-(at least for the time being)
"Capitalism" is dead -(for the time being)
and let's NOT forget how the hunt for "good" returns – motivated all of these people
getting into the Stock Casino – during the lockdown – as there was nothing else
to do – for a lock downed Capitalist) – than calling his or her broker
–
And did you guys ever see the numbers of new "Investors(gamblers) during the lockdown? It
included ALL these retirees of my family who NEVER EVER would play with Stocks if there
(still) would be "decent" returns from saving accounts.
So in a very (ironius?) way the low interest rates created a whole new "class" of
InvestmentCapitalist who NOW pray that sooner than later "Capitalism" -(in accordance to the
words definition) returns to "an economic and political system in which a country's trade and
industry are controlled by private owners for profit, rather than by the state".
"... By Dr. Karin Kneissl , who works as an energy analyst and book author. She served as the Austrian minister of foreign affairs between 2017-2019. She is currently writing her book 'Die Mobilitätswende' (Mobility in transition), to be published this summer. ..."
"... "humanitarian corridor" ..."
"... "good opposition" ..."
"... "humanitarian war," ..."
"... "worst mistake." ..."
"... "geopolitical commission." ..."
"... "community of the good ones" ..."
"... "Friends of Libya," ..."
"... "good opposition" ..."
"... "exclusive economic zone" ..."
"... "other actors" ..."
"... "mare nostrum" ..."
"... Think your friends would be interested? Share this story! ..."
By
Dr.
Karin Kneissl
, who works as an energy analyst and book author. She served as the Austrian minister of foreign affairs
between 2017-2019. She is currently writing her book 'Die Mobilitätswende' (Mobility in transition), to be published this
summer.
A confrontation between the two NATO states France and Turkey continues to trouble the Mediterranean region; Egyptian forces
are mobilizing. And many other military players are continuing operations there.
In March 2011, during a hectic weekend, the French delegation to the UN
Security Council managed to convince all other member States of the Council to support Resolution 1973. It was all about a
"humanitarian
corridor"
for Benghazi, which was considered the
"good opposition"
by the
government of Nicolas Sarkozy. One of his whisperers was the controversial philosopher Bernard-Henri Levy, who supported a
French intervention. Levy, fond of the
"humanitarian war,"
found a congenial
partner in Sarkozy.
France was at root of crisis
Muammar Gaddafi had been received generously with all his tents in the park of
the Elysée, but suddenly he was coined the bad guy. The same had happened to Saddam Hussein in Iraq. It was not the Arab
dictator who had changed; it was his usefulness to his allies. The Libyans had been distributing huge amounts of money in
Europe, in particular in Rome and Paris at various levels. In certain cases they knew too much. Plus, the Libyans had been
protecting the southern border of the Mediterranean for the European Union.
So, the French started the war in 2011, took the British on board, which made
the entire adventure look a bit like a replay of the Suez intervention of 1956, the official end of European colonial
interventions. A humanitarian intervention changed into regime change on day two, which was March 20, 2011. Various UN
Security Council members felt trapped by the French.
The US was asked to help, with then-Secretary of State Hillary Clinton and
many other advisers in favor of joining that war. President Obama, however, was reluctant but, in the end, he gave in. In one
of his last interviews while still in the White House, Obama stated that the aftermath of the war in Libya was his
"worst
mistake."
Libya ever since has mostly remained a dossier in the hands of administrative
officials in Washington, but not on the top presidential agenda anymore. This practice has been slightly shifting in the past
weeks. US President Donald Trump and France's Emmanuel Macron had a phone conversation on how to deescalate the situation
there. Trump also spoke on that very topic with Turkish President Recep T. Erdogan. Paris supports General Haftar in his war
against the Turkish-backed Government of National Accord, which is also supported by the European Union, in theory
The triggering momentum for the current rise in tensions was a naval clash
between French- and Turkish-supported vessels. Both nations are NATO members, and an internal alliance investigation is
underway. But France decided to pull out of the NATO naval operation that enforces the Libya arms embargo, set up during the
high-level Berlin conference on Libya in mid-January 2020. Without the French vessels it will be even more toothless than its
critics already deem it. This very initiative on Libya was the first test for the new European commission headed by Ursula von
der Leyen and claiming to be a
"geopolitical commission."
The EU strives to speak
the language of power but keeps failing in Libya, where two members, namely Italy and France, are pursuing very different
goals. Rome is anxious about migration while Paris cares more about the terrorist threat. But both have an interest in
commodities.
When Gaddafi was reintegrated in the
"community
of the good ones"
in early 2004 after a curious British legal twisting on the Lockerbie attack of December 1988, a
bonanza for oil and gas concessions started. The Italian energy company ENI and BP were among the first to have a big foot in
the door. I studied some of those contracts and asked myself why companies were ready to accept such terms. The answer was
maybe in the then rise in the oil price of oil and the proximity of Libya to the European market.
Interestingly, in September 2011, the very day of the opening ceremony of the
Paris conference dubbed
"Friends of Libya,"
a secret oil deal for the French
company Total was published by the French daily Libération. The
"good opposition"
had
promised the French an interesting range of oil concessions. Oil production continuously fell with the rise of the war,
attracting sponsors, militias and smugglers from all horizons. The situation in Libya has since been called 'somalization,'
but it would become even worse, since many more regional powers got involved in Libya than ever was the case in hunger-ridden
Somalia.
In exchange for its military assistance, Turkey recently gained access to
exploration fields off Libya's shores. Ankara had identified an
"exclusive economic
zone"
with the government in Tripoli, which disregards the UN Convention on the Law of the Sea. Actually, Israel made the
same bilateral demarcation with Cyprus about ten years ago, when Noble Energy started its delineation of blocs in the Levant
Basin. So Turkey is infringing on Greek and Cypriot territorial waters, while President Macron keeps reminding his EU
colleagues of the
"other actors"
in the Mediterranean Sea. Alas, it is nobody's
"mare
nostrum"
as it was 2,000 years ago in the Roman era. In principle, all states which have ratified the UN Convention on
the Law of the Sea should simply comply with their legal obligations.
The crucial question remains: who has which leverage to de-escalate? Is it the
US President, who seemingly has acted more wisely on certain issues in recent times? Or will Russian and Turkish diplomacy be
able to negotiate and implement a truce? The tightrope-walk diplomacy between these last two countries is a most interesting
example of classical diplomacy: interest-based and focused; able to conduct hard-core relations even in times of direct
military confrontation and assassinations (remember the Russian Ambassador Karlov, shot by his Turkish bodyguard in Ankara in
December 2016?).
Meanwhile, yet another actor could move in to complicate everything even more.
On July 20, the Egyptian parliament voted unanimously for the deployment of the national army outside its borders, thereby
taking the risk of direct confrontation with Turkey in Libya. Egyptian troops would be mobilized in support of the eastern
forces of General Khalifa Haftar. Furthermore, Cairo would thereby compete even more obviously with Algeria, spending a
fortune on military control of its border with Libya. Algeria in the past could rely on US support in the region, but with the
gradual decline in US engagement in that part of the world, the country faces a fairly existential crisis.
There are currently two powers, among those involved in Libya, that can still
contain the next stage of a decade of proxy wars started by a French philosopher and various EU oil interests: Russia and the
USA.
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The statements, views and opinions expressed in this column are solely those of the author and do not necessarily represent those
of RT.
Quizblorg
48 minutes ago
Does anything here make sense? No, because France this, Italy that is not how the world is run. The parties
involved here go far beyond countries. Also no mention of Saudi-Arabia/Israel. Who engineered the "Arab
Spring"?
It's difficult to understand what's going on in the world because powerful people actively
manipulate public understanding of what's going on in the world.
Powerful people actively manipulate public understanding of what's going on in the world
because if the public understood what's going on in the world, they would rise up and use their
strength of numbers to overthrow the powerful.
The public would rise up and use their strength of numbers to overthrow the powerful if they
understood what's going on in their world because then they would understand that the powerful
have been exploiting, oppressing, robbing, cheating and deceiving them while destroying the
ecosystem, stockpiling weapons of Armageddon and waging endless wars, for no other reason than
so that they can maintain and expand their power.
The public do not rise up and use their strength of numbers to overthrow the powerful
because they have been successfully manipulated into not wanting to.
There might be some extremely smart tradesmen, but exception does not justify the rule.
Colledge is a nessesary step for a smart people to mature and obtain a wider worldview as well as
some specific skills
Young male tradesmen I've met are the smartest of the bunch. Most of them have high test
scores and could easily go to college, but they see the writing on the wall. They,
rightfully, see no point in wasting 4 years of their life for a low paying office job in an
environment of outright discrimination. I know several kids that finished highchool in 3
years and are making real money at the age of 18 with no debt involved. They don't have to
worry about the system being stacked against them because none of the affirmative action
types want to do actual work anyway.
1. There is no "real money" -- this is all fiat currency and the gravy train is ending
very soon.
2. Trump supports H1B visas being extended to "essential trades". These young men will be
pushed out of these fields within 3-5 years by Indians and legalized aliens, DACA recpients,
etc. My colleagues at my university think tank who advise our Republican Senator on public
policy are advocating for explicitly this.
3. Unionized trade workers average between 84-97IQ nationally on the Stanford-Binet test.
They are the definition of "Low IQ", which is what I asserted they were.
The American Revolution was a catastrophe for its economy, which had to endure decades of
reconstruction. In order to neutralize the threat of the British Empire, it stroke multiple
trade deals with it.
The USA is home to the father of protectionism: Alexander Hamilton. He stated that a
national industry in its infancy should be protected from its more mature competition. The
USA followed his advice and protected its nascent industry from the British threat.
When the British Empire begun to degenerate, the Americans used the cheap British capital
in excess in the financial markets to build up their infrastructure, specially their
railways. Australia did the same.
The Founding Fathers did what they had to do in order to protect their country and make it
flourish. When the ideology of the time stated they shouldn't, they invented a new ideology
that stated they should. And the could: when the British and French tried to destroy the USA
through a sea embargo, they responded in kind (Embargo Act of 1807) and prevailed; they did
not cave in to the then imperial powers.
So, I don't understand why so many Americans are offended with China. The capitalist world
tried to keep China poor and as a raw material exporter, sweatshop conglomeration. China
didn't accept this, and decided to fight back. The result is here for all of us to see.
Another revision by the IMF (the first one was some -2%, and I called here it was "too
optimistic").
I think a -6.6% fall in GDP is plausible for the USA. The USA, as the HQ of capitalism, has
tools and weapons that the rest of the world doesn't have, so, if they get lucky, a mere 6.6%
fall is possible.
But, all in all, I still think it's still too optimistic. For example, the IMF still refuses
to admit a second wave will come to the West.
The MMTers reading your article will take umbrage at your use of finance .
According to MMT, all government spending is financed by creating money. The
problem of where to get the money is a non-problem.
Once the government has spent money into existence, the real problem is how to distribute
the social opportunity cost of the spending, especially if the government has spent money to
allocate real resources away from the production of private goods and services.
MMT makes this distinction precisely because they (we?) want to eliminate the rich as a
veto point for spending. We don't need to get their money in order to spend it, and they
cannot (or we should not let them) essentially restrict spending by obstructing the
government's taxation of their wealth.
If we want to get the money belonging to the rich (and we do!), we want to do so because
we don't want them to have it, for whatever reason.
There's another reason to be explicit about the difference between financing and
distributing opportunity costs. If the rich have a lot of money that is not in circulation
(in the national economy), and the government taxing that money to "pay for" its spending
will do nothing to control inflation or distribute opportunity costs. Removing money that is
not circulating has no effect on prices. It seems theoretically possible to balance the
budget financially but still see price-level inflation.
I haven't done any specific investigation into the GND, but it seems uncontroversial that
it will involve allocating substantial real resources to the creation of a nonpolluting
power, transportation, and agricultural infrastructure. However, the effect on the real
economy and the price level seems uncontroversially complicated. Some of the real resources
will be previously unallocated, and we will simply be transferring demand from
welfare-supported to work-supported, with no effect on the price level. Some of the demand
created will indirectly cause an increase in private production, putting unused industrial
capacity to work; the increase in circulating money will cause a corresponding increase in
real private production, and again have no net effect on the price level. And some of the
real resources will indeed be transferred from private production with no corresponding
offset; taxes, "enforced" borrowing, and other monetary interventions will be needed to keep
price inflation manageable.
I don't know of (and, like Lee A. Arnold above, would very much like to see) a model
showing what effect something like the GND would have on the real economy. Under
normal circumstances, the fiscal impact is a good proxy for the real impact. But
circumstances are far from normal, so think that the fiscal impact is no longer a valuable
proxy for modeling the real impact.
"The ultimate constraint on money creation is inflation. That hasn't been a problem lately
and (as I'll argue in more detail later) the world is in need of a fair bit of inflation,
probably at an annual rate of about 4 per cent for the foreseeable future. It's unclear how
much expansion of the monetary base would generate this outcome, while avoiding the risk of a
resurgence of inflation like that of the 1970s"
I don't agree that this is the problem: IMO the direct cause of [keynesian] inflation is
the wage-price spiral, and not money creation per se (this also implies a problem, which is
that if we want an high level of employment because we want an higer bargaining power for
workers we can't really avoid wage-price spirals and therefore inflation).
Money creation by itself creates wealth, not income, and the kind of economic policies we
had in recent decades caused an increase in the wealth/income ratio (or in other words the
creation of a lot of fictitious capital) more than inflation.
So the real problem of "money creation" today is that it generates financial bubbles, rather
than inflation.
The difference between money printing and government debt, from this point of view, is just
that money is a 0% interest financial asset, whereas bonds bear at least some interest, so
money creation pushes the general interest rate down more than bond creation, but this again
is a consequence of the increase of the wealth/income ratio (since more wealth extracts
profits from the same quantity of income).
"Substantial reductions in private consumption and investment will be needed to make room
for the required public expenditure, and that can only be achieved through a combination of
taxation and debt."
In my view the problem is that taxation is needed to avoid bubbles, and therefore what we
need is to tax income from wealth and wealth itself (in order to push down the wealth/income
ratio).
To put it in more familiar keynesian terms, the problem is that the ex-ante saving rate is
too high, so that currently we need an increase in debt levels (bubbles) to ricycle ex-ante
savings into consumption; we need taxation to push down the ex-ante saving rate.
But, the problem is, is it possible to have a capitalist economy running without economic
crises while the wealth/income ratio goes down (which means that a lot of people see their
relative wealth go down)?
IMO this is really difficult, and also explains the political problem for policieswhose
purpose is to push down the wealth/income ratio, since these policies look like just some way
to be mean against wealth owners, without an immediate economic reason, and when the bubble
pops everyone blames the banks and the financial sector, not the excessively high ex-ante
saving rate, that is instead perceived as a virtue.
Recent quantitative easing of only 2% of GDP doesn't provide much of a bound on how much
can be tolerated without causing too much inflation. Inflation is still up against the zero
lower bound, and it seems plausible that we could get more than a factor of two more money
creation. Which does get us into the green new deal range.
@1 The Green part is (comparatively) easy and low cost. It's the New Deal (free college
tuition, Job Guarantee, single-payer health etc) that will require a bit transfer of
resources.
@6 Transfers of real resources or financial resources? Single-payer requires an expansion
of suppliers in the healthcare sector to meet the uncovered demand, and those suppliers will
be new taxpayers. College learning will be going more on-line, a tendency accelerated by this
pandemic and anticipating the next pandemic, so we need, not many more buildings, but more
professors, but they too will be new taxpayers. The jobs guarantee could be structured to
generate sector expansions, not merely makework. So couldn't all of these eventuate in
expanded sectors, ergo more taxes? Government investment at rock-bottom interest rates?
Only too much is enough, we want to print and spend enough to change expectations.
Currently, the dollar is the reserve currency I think largely for "safe haven" reasons,
i.e. the oligarchs who have all the assets believe the US will be the last place to inflate,
devalue, or elect an expropriating left-wing gov't.
After 40+ years of capital share gains and worker immiseration in terms of real and social
wages and labour solidarity, and assuming we have under President S Kelton control only of
printing and spending but no ability to raise progressive redistributive taxes how much MMT
financed spending will it take to have the average worker believe that her real wages, social
wages, standard of living, opportunities etc will improve relative to capital and the rich
for the next forty years? And have the oligarchs also believe it?
That's how much.
Alan White 07.19.20 at 1:21 am (no link)
John, what say you about US/global military spending, which if cut and reallocated in the
low double digits could transform society? Do you think it's just politically untouchable? If
the US cut its military budget by say 25% it would still be formidable, especially given its
nuclear deterrent. For the life of me I can never understand why military budgets are
sacrosanct. Is it just WW2 and Cold War hangover? Couldn't the obvious effects of climate
change and the fragility of the economy subject to natural threats like the pandemic change
attitudes about overfunding the military (like the debacle of the F-35 program)?
@Tim Worstall: The political poles shifted, but less than you might think. Southern pols
were overwhelmingly opposed, and nearly all of them were D (the entire old Confederacy had
only 11 R Reps and only 1 R Senator). Northern pols, including Dirksen, were overwhelmingly
in favor, and they were split between the two parties. But if you break it down by party
and region, a larger percentage of Ds than Rs voted for the bill within each region.
https://www.theguardian.com/commentisfree/2013/aug/28/republicans-party-of-civil-rights
An interesting example of Simpson's paradox.
I don't know about the Democratic Party, but there was an important shift in the
Republican Party: the thing is, that shift took place in the nineteenth century, not the
twentieth. At the end of the Civil War, the Republican Party really was the party of civil
rights, with champions of equality prominent within it; after the end of the Reconstruction
this ceased to be true. Of course the Republican Party has changed further since then,
because everything changes; but it hasn't changed as rapidly since the late nineteenth
century as it did after the Civil War.
Alan White @13 Military spending is about 3.4 per cent of US GDP, compared to 2 per cent
or less most places. So that's a significant and unproductive use of resources that could be
redirected to better effect. But the income of the top 1 per cent is around 20 per cent of
total income. If that was cut in half, there would be little or no reduction in the
productive services supplied by this group. If you want big change, that's where you need to
look.
I think some of the reluctance to cut military spending in the US is the extent to which
it acts as a politically unassailable source of fiscal stimulus and "welfare" in a country
where such things are otherwise anathema. Well, that and all of the grift it represents for
the donor class.
"... The ruling effectively ends the privileged access companies in the United States had to personal data from Europe and puts the country on a similar footing to other nations outside the bloc, meaning data transfers are likely to face closer scrutiny. ..."
"... The so-called Privacy Shield was set up in 2016 by Washington and Brussels to protect personal data when it is sent to the United States for commercial use after a previous agreement known as Safe Harbour was ruled invalid in 2015. ..."
U.S. Secretary of State Mike Pompeo said on Friday the United States was "deeply disappointed" in a ruling
on Thursday by Europe's highest court that a trans-Atlantic data transfer deal is invalid because of concerns about U.S. surveillance.
Pompeo said in a statement that the United States would review the consequences and implications of the decision by the Court
of Justice of the European Union that could disrupt thousands of companies that rely on the agreement.
"We are deeply disappointed that the Court of Justice of the European Union ... has invalidated the EU-U.S. Privacy Shield framework,"
Pompeo said.
"The United States will continue to work closely with the EU to find a mechanism to enable the essential unimpeded commercial
transfer of data from the EU to the United States," he added.
The ruling effectively ends the privileged access companies in the United States had to personal data from Europe and puts the
country on a similar footing to other nations outside the bloc, meaning data transfers are likely to face closer scrutiny.
The so-called Privacy Shield was set up in 2016 by Washington and Brussels to protect personal data when it is sent to the United
States for commercial use after a previous agreement known as Safe Harbour was ruled invalid in 2015.
More than 5,000 companies have signed up to it but the Privacy Shield was challenged in a long-running dispute between Facebook
and Austrian privacy activist Max Schrems, who has campaigned about the risk of U.S. intelligence agencies accessing data on Europeans.
(Reporting by Daphne Psaledakis; editing by Jonathan Oatis)
With tens of millions of Americans out of work, people fleeing cities for rural communities,
others working from home, online shopping flourishing, and the
virus remerging in many states forcing governors to pause or reverse reopenings,
consultancy firm KPMG
International has some bad news for those betting the economy is going to "rocket ship"
recovery as President Trump boasts about at press conferences and on Twitter. The consultancy
firm warns "social-distancing measures" will "dramatically cut the amount of miles Americans
travel by car" (fewer miles driven is terrible news for an economy driven by consumer
spending).
The effects of COVID-19 will be felt for years. The response to the virus has accelerated
powerful behavioral changes that will continue to shape how Americans use automobiles. We
believe the changes in commuting and e-commerce are here to stay and that the combined effect
of reduced commuting and shopping journeys could be as much as 270 billion fewer vehicle
miles traveled (VMT) each year in the US. -KPMG
"Today the Department of State is updating the public guidance for CAATSA authorities
to include Nord Stream 2 and the second line of TurkStream 2. This action puts investments or
other activities that are related to these Russian energy export pipelines at risk of US
sanctions. It's a clear warning to companies aiding and abetting Russia's malign influence
projects and will not be tolerated. Get out now or risk the consequences".
Pompeo speaking at a press conference today.
CAATSA -- Countering America's Adversaries Through Sanctions Act
So Russia and Turkey are "adversaries" of the USA?
In what way?
Do these states wish to wage war against the USA?
Is it adversarial to United States interest to compete economically with the hegemon?
Who cares? Really, is Pompeo still scary? If he has a functioning brain, he should realize
that all these blatant efforts to reserve markets for America by sanctioning all its
competitors out of the picture is having the opposite effect, and frightening customers away
from becoming dependent on American products which might be withheld on a whim when America
wants political concessions. 'Will not be tolerated' – what a pompous ass. Sanction
away. The consequence is well-known to be seizure of assets held in the United States or an
inability to do business in the United States. That will frighten some into submission
– like the UK, which was threatened with the cessation of intelligence-sharing with the
USA (sure you can spare it?) if it did not drop Huawei from its 5G networks. But others will
take prudent steps to limit their exposure to such threats, in the certain knowledge that if
they work, they will encourage the USA to use the technique again.
As Joe Biden tries to split the difference between the midwestern swing-state voters and the
Sanders faithful,
he's released an economic plan - a plan that bears the imprimatur of his one-time foe
Bernie Sanders - that, in its attempt to be everything to every one, effectively promises
everything to every one.
Buy American. Green New Deal. Corporate tax hikes. Trillions of dollars spent on
infrastructure to install the latest eco-nonsense with money that should be going to roads,
bridges, rails and airports. Docks and highways. Things people actually need and use. And who
knows? Depending on his running mate, maybe we'll get a massive student-debt jubilee, too. All
on the federal government's tab.
Now that MMT has gone from fringe idea to mainstream, making Stephanie Kelton, a
cryptomarxist who believes that the link between value and money can be completely severed, so
long as we tax the wealthiest among us enough to keep inflation low. It doesn't take a genius
to suspect that an 'economic theory' grounded in the idea that governments can take on
unlimited amounts of debt and never stick anybody with the tab sounds absurd - even
dangerous.
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We say dangerous because Kelton's greatest sin is offering pandering politicians more cover
to encourage their spendthrift ways. During a recent interview with Macro Hive, former Central
Bank of India Governor and University of Chicago Professor Raghuram Rajan delivered a succinct
and insightful explanation of why MMT is so dangerous.
"We talked about sustainability and one of the big topics in markets at least is this
whole idea of QE MMT infinity, the ability of sovereigns to borrow. Now in developed
countries, they have historical capital they've built up and credibility," Rajan's
interviewer began. "But you're starting to also see this idea...you're starting to see more
emerging market countries experiment with it, including Indonesia and several others."
But at the same time "yields are very low, and if you look at emerging market spreads,
they're very low...so markets are telling you that they aren't worried. Yet we know debt levels
are high, and there's more talk in debt markets of QE and MMT."
Does the fact that markets seem content with the status quo (at least for now) validate
Kelton's argument?
Of course not, Rajan explained. Because while the complexities of the global financial
system, and the dollar's role within it, have allowed the Fed to spearhead this great monetary,
as the veteran central banker explained, there's no such thing as a free lunch.
"We know that markets can be complacent until a certain point and then they turn on a
time. We are at this point in a benign phase supported by an enormous amount of central bank
liquidity emanating from the primary reserve currencies, the euro area, the US Fed and to
some extent the Bank of Japan and the Bank of England."
"But we must also recognize is that there are no free lunches. If there's one statement
you want to keep to pound into the head of every policy maker, it's that there are no free
lunches. If you borrow today, there is a presumption that it will be repaired at some point,
so you are in a sense taking away resources from somebody else in the future."
" Now it may be a generation or two down the line will be on the hook for this ...whether
they can pass it on to their children is an open question...but you're definitely taking away
their ability to borrow by borrowing today."
.While burdening future generations doesn't seem to come up much in cryptomarxist essays
about the moral imperative of expansive fiscal spending - some have gone so far as to argue
that the federal government has a moral obligation to forgive student debt - Rajan acknowledges
that the idea is "seductive" for all the wrong reasons.
"So the idea that there are free lunches...which certainly is what the lay person takes
away from MMT...is very sort of attractive, seductive - but it's absolute nonsense."
If that's the message that's going to be communicated, then that's wrong.
Asked to elaborate, he continued...
"There are times when you can spend a little bit more, but you are still making a trade off
and evaluating this trade off well...I think that's the right thing to do. If that's the
message from MMT, then I'm fine with that. There are periods where you have more leeway."
"The message can't be 'Don't Worry, Be Happy' it has to be 'yes take advantage of periods
when you have a little more spending capacity but use it wisely, because there's no such thing
as a free lunch and you will have to repay it at some point... that's what any sensible
economic theory will tell you, and I think that's what we understand now."
"When banks aren't lending, when inflation is low, it is possible for the central bank to
expand its balance sheet somewhat ...and finance more activities that the government wants to
undertake. That doesn't mean it's free debt it's equivalent to debt issued by the government -
think of the central bank issuing debt as the same as the government issuing debt: it's the
consolidated balance sheet you're looking at."
"Somebody is responsible for payment, it's either the central bank or the government."
"At low interest rates it doesn't really matter who it is, but as inflation picks ups it
does matter a little more who it is because the central bank often is financing itself with
effectively forced loans from the banking sector, and there's a limit to how much the banking
sector is willing to do that, especially as economic activity picks up."
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"So my sense is yes there is some room now but it doesn't mean the debt level doesn't matter
and it doesn't mean that we should just keep spending without thought of who's going to repay.
And I think the big philosophical issues are how much are you going to bail out companies...why
should Joe Schmoe...why should his taxes go to bail out a capital owner? After all, neither of
them saw the pandemic coming...neither is responsible for the pandemic...so why should one bail
out the property rights of another?"
"It strikes me these guys who want to open up the government wallet and spend to protect
everybody from the consequences of the pandemic don't realize that there's one person who's
bearing the hit: it may not be you, but it might be your children."
"And the question is: Why do they have to pay when they have no part in this?"
Remember: As Rajan explains, we must recognize that our resources are limited and use them
wisely. Keep that in mind when Democratic politicians are trying to spend trillions of dollars
of public money to outfit private buildings with solar panels or whatever 'Green New Deal'
infrastructure travesty AOC & Co come up with.
The good news is that the unstoppable juggernaut of globalization has fallen to it's
knees. Countries and societies around the world will have to look at ways they came become
independent and self sufficient,at least to some degree. It's like "War of the Worlds"
really, the best effort of humanity to contain the plague fails, but a random natural
occurrence saves humanity from the brink of destruction. Hopefully some real scientists will
be allowed to mitigate the medical disaster, but one thing is for sure, the grand plan of
turning everyone into a nomad competing for pennies on the international market, for the sole
benefit of the richest among the rich, is dead. Some really hard times are coming for the
international nomads/ parasites, and hopefully humanity will move to some more beneficial
culture, and have a real chance to survive as a species, in the long term.
Even the good news for the world's auto market seems to be bad news right now.
Day ago,
when detailing China's passenger auto sales plunge for the month of June, we noted that the
China Association of Automobile Manufacturers has been predicting for the last few months that
auto sales would fall between 15% and 25% for the year.
Those predictions have now been adjusted slightly upward , to a drop of 10% to 20%, despite
the fact that China's auto market still appears to be leading the global market into several
more years of deep recession. Recall, the auto market was already facing headwinds and China's
market specifically was already contracting for several years before the pandemic.
And while passenger vehicles fell 6.5% in June ,
as we noted , total vehicle sales rose 11.6% for the month to 2.3 million units, likely
helping lead to the revised predictions for the year. The driving force behind total vehicles
rising was a 63% surge in commercial vehicles, which also saw a 8.6% rise in the first half of
2020, likely due to vehicles being used to manage the spread of the virus in the country
... .... ....
This news comes despite better than expected results in May, where sales
showed a 12% increase year over year.
According to The
Detroit Bureau , premium and luxury passenger car retail sales led the charge in May,
rising 28% last month compared with year-ago results. Luxury vehicles maintained their strength
in June.
Recall,
we have recently noted that U.S. auto manufacturers are also teeing up sizeable incentives
to get buyers back into showrooms. Europe is following suit, with Volkswagen starting a sales
initiative to revive demand, including improved leasing and financing terms.
Funny how the visa-free map from before the COVID-19 pandemic is roughly equal to the
extent of the American Empire itself.
And the loss of foreign students signifies much more than the mere loss of income for the
American universities: it also means the loss of grip over the provinces' regional
elites.
Most of the foreign students in the USA are sons and daughters of the regional elites.
They live the American way of life, get westernized, and go back to their countries (which
they will likely rule) with a liberal ideology ingrained in their minds. They are the rough
equivalent to what the hostage was during Antiquity. To lose 263,000 hostages in less than
one year would be a devastating blow to American diplomacy.
One commenter mentioned a brain drain in relation to foreign students no longer coming to
America but I guess the brain drain will occur when out of work professors start heading off
to other countries like China in search of work.
Posted by msmash on Friday July 10, 2020 @02:45PM from the closer-look dept. Technology
startups have been
laying off tens of thousands of workers to cope with the economic fallout of the
coronavirus pandemic, potentially blunting a key innovation pipeline for the enterprise
information-technology market, according to industry analysts. From a report: "Startups are
a great source of innovation in the IT industry, but are now especially cash constrained," said
Max Azaham, a senior research director at research and consulting firm Gartner. Mr. Azaham said
the coronavirus has made startup investors far more risk averse, resulting in a sharp downturn
in investment capital for IT companies looking to raise less than $100 million. As of last
week, nearly 70,000 tech-startup employees world-wide had lost jobs since March, led by
ventures in the transportation, financial and travel sectors, according to a report by
U.K.-based brokerage BuyShares.co.uk.
Startups in the San Francisco region, including Silicon Valley, have shed more than
25,500 jobs, including layoffs at high-profile companies such as Uber, Groupon and Airbnb, the
report said. Uber in May announced more than 6,500 layoffs, cutting roughly a quarter of its
workforce. A month earlier, Lyft said it would cut about 17% of its workforce, furlough workers
and slash pay in cost-cutting efforts to cope with lost sales during the coronavirus pandemic.
Startups developing artificial intelligence and other emerging digital tools fall under the
category of tech-sector employers, which have cut jobs for four consecutive months, said Tim
Herbert, executive vice president for research and market intelligence at IT industry trade
group CompTIA. The cuts included a record 112,000 layoffs in April, as tech companies scrambled
to slash costs, according to CompTIA's analysis of federal employment data.
During the pandemic, readers may recall several of our pieces describing what life would be
like in a post corona world.
From restaurants to
flying to gambling to hotels to
gyms to interacting with people to even
housing trends - we highlighted how social distancing would transform the economy.
As the transformation becomes more evident by the week, we want to focus on automation and
artificial intelligence - and how these two things are allowing hotels, well at least one in
California, to accommodate patrons with contactless room service.
Hotel Trio in Healdsburg, California, is surrounded by wineries and restaurants in
Healdsburg/Sonoma County region, recently hired a new worker named "Rosé the Robot" that
delivers food, water, wine, beer, and other necessities, reported
Sonoma Magazine .
"As Rosé approaches a room with a delivery, she calls the phone to let the guest know
she's outside. A tablet-sized screen on Rosé's head greets the guest as they open the
door, and confirms the order. Next, she opens a lid on top of her head and reveals a storage
compartment containing the ordered items. Rosé then communicates a handful of questions
surrounding customer satisfaction via her screen. She bids farewell, turns around and as she
heads back toward her docking station near the front desk, she emits chirps that sound like a
mix between R2D2 and a little bird," said Sonoma Magazine.
Henry Harteveldt, a travel industry analyst at Atmospheric Research Group in San Francisco,
said robots would be integrated into the hotel experience.
"This is a part of travel that will see major growth in the years ahead," Harteveldt
said.
Rosé is manufactured by Savioke, a San Jose-based company that has dozens of robots
in hotels nationwide.
The tradeoff of a contactless environment where automation and artificial intelligence
replace humans to mitigate the spread of a virus is permanent
job loss .
When we last looked at real-time consumer spending data
one month ago , we saw a stunning rebound in Bank of America credit and debit card spending
trends, with total card spending ex-autos essentially recovering pre-covid levels by early
June.
No doubt, a big part of this was due to the surge in Personal Income since the start of the
current recession, which as we explained earlier was a
function of the extremely generous fiscal stimulus which meant that on a per capita basis,
claimants received roughly $788/week ($41k annualized) on average, well above the usual amount
of roughly $300 in a normal labor environment ($15-$16k annualized).
Let it Go , 6 minutes ago
What consumers buy matters a great deal. When looking at the policies flowing out of
Washington it is clear many politicians seem to have no idea that all consumer spending and
purchases are not created equal. The fact is, consumers should take a long look at how their
purchases will impact the economy over time.
Where money flows and who it enriches is a key component of economics, the failure to
consider this is a blind spot many people have. The article below delves into this important
issue.
People are stupid.
Me, I have money in the bank, but a low income, so I spend less than my income, my
bank-account grows. That is me, in Old skool Europe. My bank-account = >
750.000€.
But I don't need it, I'm a minimalist, always was, but I like the thought that I have it, to
fall back when I'm tired.
America, credit cards, spends all you want. Even if you don't get it.
I remember that interview with a woman, after the sacking of Lehman Brothers. She made a
super-high figure income (more than I wish for), but she spend it all while it lasted.
And now she was on the streets and homeless. How is that even possible?
She worked for Lehman, but she was utterly stupid? "Can I apply for that job, coz I'm so
much smarter."
It happens here in the old continent too, but the impact is lessened, because of our
social systems.
I rest my case.
Let it Go , 44 seconds ago
Yes they are stupid! It is difficult to reconcile the fact that 60% of the millennials
surveyed say they believe they will be wealthy "within 1 to 10 years" considering that 59% of
those in this age group said they still live paycheck to paycheck . Making this even harder
to understand is it appears many people now feel that in order to be "rich," they need to be
worth an average of $2.3 million.
This amount is more than 20 times the actual median net worth of U.S. households. More on
the subject of wealth in America in the article below.
Existing theories of economics and the financial system cannot match successfully with
current conditions.
Long term data on stock index breadth, corporate earnings, Treasury yields and S&P
500 dividend yield strongly suggest a fundamental break with the past is in progress.
Past economic and financial system models, analytical tools and metrics will have to be
entirely reconsidered and reconstructed.
The Secular Systemic Shift now underway is so profound and so far-reaching and so
all-encompassing that it is probably analogous to the shift occasioned by the Age of
Enlightenment, the Scientific Revolution, the American Revolution and (later) the
Industrial Revolution.
Recently, in the wake of the dramatic, catalyzing events associated with the COVID-19
pandemic, analysts have struggled to match the action in the Economy with that of the
Financial System. Existing disparities of inequality and maldistribution have been
dramatically exacerbated as the financial indices have soared. In no quarter is there found
any real explanation for the utter failure of all existent theories to anticipate or explain
our current experience. The general reaction is one of befuddled annoyance. Irrespective of
viewpoint, left or right, economists and market analysts are trying to figure out why the
emergent reality does not conform to their model of how things should be and the default
tendency is to wag a finger of blame at the other side of the aisle.
In the Eisenhower era, corporations paid over 1/3 of the federal budget. Tariffs on imports
also paid a large percentage. The top marginal personal income tax rate was 70%.
In the 1960s, my father worked for Bell Aerosystems. The CEO made $120K managing 20,000
employees and building surface ship and rocket engines for Gemini and Apollo. Dad made $12K in
an administrative role and experienced machinists made $18K.
The system WORKED for most everyone.
Today, chief executives make 300X the earning of peons. Corporations pay only 6% of the
federal budget. Amazon paid ZERO corporate income tax. Apple paid 2%. Lockheed Martin paid
14%.
And where are they going to move, Colonel? Maybe LM will go to Russia or China? Maybe Amazon
will move to Alexandria and make life miserable there? Microsoft to Bangalore or Little
Rock?
Race to the bottom pandering to corporations, which has been the case for 40+ years now.
There is absolutely nothing wrong with expecting corporations to pay taxes. I have no idea what
is the basis of the objection. Do any of the readers here pay more than corporations? I sure
do!
Germany eased strict social distancing restrictions on April 20 and started the process of
reopening its economy as the virus pandemic curve flatten. However, the consequence of closing
businesses and forcing people to stay home, along with shutdowns of international commerce,
resulted in a deep recession in the first half of the year for the exporting nation.
A new survey via the German Chambers of Commerce (reported by
Reuters ) said 83% of domestic firms with high international exposure had experienced a
collapse in revenues. Many of these firms, about 93% of respondents, said the global economy
could improve in 2021 or beyond.
The survey is an eye-opener for Europe's largest economy, and one of the largest exporting
nations in the world, suggesting a global economic recovery in the shape of a "V" is not
feasible for the back half of 2020. About 15% of the 3,300 companies surveyed said their annual
turnover is expected to be halved.
It was noted the impact of the virus-induced downturn, whereas at the start of the pandemic,
crushed travel and tourism, has now impacted other sectors and rippled through the economy in
the form of a demand shock.
Fifty-nine percent of respondents this month (July) warned of slumping demand for their
products and services, up from 57% in April.
Under such conditions, firms are unwilling to invest - more than half of the respondents
said they're cutting CapEx abroad, compared with 35% in April.
We noted on Tuesday, global CapEx is expected to be slashed, on average, 12%, which is much
larger than the 11.3% decline during the global financial crisis in 2008-09. Global
capital expenditure weakness suggests a weak recovery is ahead.
German Chambers of Industry and Commerce released a report on Wednesday indicating exports
will drop by 15% in 2020 with a slight recovery in 2021.
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The German government has unveiled a $146 billion stimulus package to jump-start the
severely damaged economy. However, it appears the recovery, so far, has been a dead cat bounce
that will not revert to 2019 growth activity levels for the next several years, or
longer...
German industrial production has a long ways to go...
So what must be done to supercharge a recovery? Well, we offer insight here .
"... The "involuntary furloughs" would include up to 15,000 flight attendants, 11,000 customer service and gate agents, 5,500 maintenance workers, and 2,250 pilots. Another 1,300 management and support staff will be laid off on October 1, the company said. ..."
"... Delta Airlines told pilots in late June that it would send WARN notices to 2,558 pilots, or nearly 20% of its pilots, notifying them of potential furloughs. Last week, Delta said that it may cut the number of flights it had scheduled for August due to lack of demand. A month ago, Delta issued the mother or all revenue warnings . ..."
With Covid-19 cases surging in the US and in other countries, airline industry ticket sales
for both domestic and international flights are declining again, as demand has turned south,
according to a presentation to employees by United Airlines, filed
with the SEC on July 7.
UA's presentation included the two charts below of new ticket sales for future travel, by
"all carriers and sales channels," based on data by Direct Data Solutions (DDS) through July 2.
They show the percentage decline in industry-wide ticket sales for domestic and international
travel from the same period last year (in a 7-day moving average). The charts are titled,
"Increase in Covid-19 cases negatively impacting industry demand":
The first chart shows the decline in ticket sales for domestic flights, in terms of the
number of passengers (blue line) and dollar revenues by the industry (purple line):
This second chart shows the decline in international ticket sales in terms of the number of
passengers:
So that's the end of any pretense of a "V-shaped" recovery of ticket sales. And it's likely
that not just airlines are impacted by this resurgence in Covid-19 cases. But airlines are
already teetering on the edge.
Yesterday, United Airlines announced that 36,000 employees in the US, or 45% of its US
workforce, could face "involuntary furloughs" on on or after October 1. That's the day after
the restrictions attached to the $25 billion in payroll aid under the CARES act expire.
United's memo of the layoffs went out to employees in order to comply with a federal law
that requires employers to give employees at least 60 days' prior warning before mass layoffs,
the so-called WARN notices.
The "involuntary furloughs" would include up to 15,000 flight attendants, 11,000 customer
service and gate agents, 5,500 maintenance workers, and 2,250 pilots. Another 1,300 management
and support staff will be laid off on October 1, the company said.
"The reality is that United simply cannot continue at our current payroll level past
October 1 in an environment where travel demand is so depressed. And involuntary furloughs
come as a last resort, after months of company-wide cost-cutting and capital-raising," the
company said.
Delta Airlines told pilots in late June that it would send WARN notices to 2,558 pilots, or
nearly 20% of its pilots, notifying them of potential furloughs. Last week, Delta said that it
may cut the number of flights it had scheduled for August due to lack of demand. A month ago,
Delta issued the mother or all revenue warnings .
All airlines have been trying to cut their workforce with voluntary measures and have been
offering severance packages and early retirement packages to nudge employees out the door
without having to lay them off. Over the next few weeks, as the 60-day period before October 1
approaches, more airlines will follow United in announcing mass layoffs.
The drama of the dropping ticket sales due to the Covid-19 resurgence is not yet reflected
in the TSA's checkpoint screenings at US airports
– a measure of how many people are getting on a plane. They were still down 74.4%
yesterday, compared to the same weekday last year. They have risen since the low point in
April, but at a painfully slow pace.
The TSA checkpoint screenings are a lagging indicator. These people bought their tickets
often weeks or months ago. The declining ticket purchases in recent days will be reflected in
future TSA screenings:
Four months into the crisis, airlines are still only flying a quarter of the passengers that
they flew last year at this time, and they're having trouble hanging on.
United told reporters today that despite the radical cost cuts and capacity reductions, it
is still burning $40 million per day. That's $1.2 billion a month, month after month. And it
said that it could not count on further government support to cover payroll costs from October
1 forward. The company said that 26,000 employees had already taken part in the voluntary
severance programs so far this year.
The V-shaped recovery of airline stocks is also funny looking. The WOLF STREET airline index
of the seven largest US airlines – Alaska, American, Delta, JetBlue, Southwest, Spirit,
and United – remains in dismal territory, down 49% from the Good Times in mid-January
2020, and down 60% from the Better Times in January 2018 (market cap data via YCharts ):
The market cap of all seven airlines has plunged since mid-January, but with different
nuances, as of the close today:
United: -59%
Delta: -57%
American: -50%
Spirit: -50%
JetBlue: -48%
Alaska: -46%
Southwest: -35%.
It's going to be a long tough slog for passenger traffic to recover. In addition to the
issues related to the Pandemic, there is now a structural issue: Business travelers, the most
profitable segment for airlines, may not fully recover in a very long time because companies
have now discovered that video conferencing and video chats can effectively replace many
trips.
Sure, there will be some business travel after the Pandemic disappears as an issue, but a
lot less than there was before. This is a huge savings in time and money for companies. But
it's a deep long-term hole for airlines.
Despite the hope-restoring nonfarm payrolls "recovery" and the over-hyped bounce in retail
sales (ignoring the lack of 'V' in industrial production) and 'soft' sentiment surveys (which
are biased by their nature as diffusion indices to bounce back hard), for the sixteenth week in
a row, over 1 million Americans filed for unemployment benefits for the first time (1.314mm was
slightly better than the 1.375mm expected).
Source: Bloomberg
Texas, New Jersey, and Louisiana suffered the biggest increases in jobless claims in the
prior week...
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That brings the sixteen-week total to 49.993 million, dramatically more than at any period
in American history. However, as the chart above shows, the second derivative is slowing down
drastically (even though the 1.314 million rise this last week is still higher than any other
week in history outside of the pandemic)
Continuing Claims did drop very modestly but hardly a signal that "re-opening" is
accelerating! And definitely not confirming the payrolls or sentiment data...
Source: Bloomberg
And as we noted previously, what is most disturbing is that in the last sixteen weeks, far
more than twice as many Americans have filed for unemployment than jobs gained during the last
decade since the end of the Great Recession ... (22.13 million gained in a decade, 49.993
million lost in 16 weeks)
Worse still, the final numbers will likely be worsened due to the bailout itself (and its
fiscal cliff): as a reminder, the Coronavirus Aid, Relief, and Economic Security (CARES) Act,
passed on March 27, could contribute to new records being reached in coming weeks as it
increases eligibility for jobless claims to self-employed and gig workers, extends the maximum
number of weeks that one can receive benefits, and provides an additional $600 per week until
July 31.
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Finally, it is notable, we have lost 378 jobs for every confirmed US death from COVID-19
(132,309) .
Was it worth it?
The big question remains - what happens when the $600 CARES Act bonuses stop flowing?
New
research from Yelp shows that as of June 15, there were nearly 140,000 total business
closures on the website since March 1. When compared to similar research released in April,
which showed more than 175,000 business closures, these latest numbers indicate that more
than 20% of businesses closed in April have reopened.
In March, restaurants had the highest numbers of business closures listed on the app
compared to other industries, and the rate of closure has remained high. Of the businesses
that closed, 17% are restaurants, and 53% of those restaurant closures are indicated as
permanent on Yelp. Retail, however, is the hardest hit overall.
During the peak of the pandemic, the number of diners seated across Yelp Reservations
and Waitlist dropped essentially to zero. In early June, numbers of diners seated are down
57% of pre-pandemic levels.
Predictions about the restaurant industry's fate in a post-pandemic world
have been abundant throughout the crisis . The National Restaurant Association estimated
that 15% of restaurants could close, while Barclay's estimate is more optimistic, predicting
approximately 10% of restaurants will shutter permanently.
Though it's hard to find a silver lining in Yelp's data, some predictions have been more
dire still. In May, OpenTable said
one in four restaurants were at risk for closure, for example, though those numbers focus
on restaurants that use the reservations platform. Casual or fine dining sit-down restaurants
and mom-and-pop concepts that are not well capitalized are expected to experience the brunt of
this crisis. The
Independent Restaurant Coalition , for example, forecast that as many as 85% of independent
restaurants could permanently close by the end of the year.
Yelp's data does illustrate how some restaurants have been able to weather the storm,
however, reporting a 10-fold increase in searches for takeout since March 10, for example.
Takeout and delivery searches are up 148%, with Yelp predicting this off-premise trend could be
here to stay.
The research also shows that restaurants catering to group dining are making a comeback,
with fondue searches up 123%, tapas bars up 98%, hot pot up 49% and buffets up 17%. Conversely,
searches for cuisines that were popular during the past three months have begun to wane,
including pizza (down 28%), Chinese (down 26%) and fast food (down 18%).
While the pendulum has swung toward group dining, perhaps due to pent up demand after
three-plus-months of safer at home orders and dining room closures in some markets, this
interest could be short lived. This data was released before
a number of states --
New Jersey , New York
and California among them --
have delayed or re-closed some or all of their restaurants due to spiking coronavirus cases.
Extended closures will further challenge operators who are burning through cash to maintain
rent, labor and other costs. Restaurants with the strongest balance sheets and best access to
capital have the best chance to endure sustained closures. The industry will favor the haves
and weed out the have-nots, a trend that has become clearer as major chains like Taco Bell,
Domino's and McDonald's
have announced massive hiring sprees .
The virus pandemic and socio-economic shockwave across the US (read ad hoc protests and
riots), and more specifically in top metro areas, has created much uncertainty for city
dwellers who are now fleeing for suburbs.
Over the past several months, we have documented city dwellers leaving big cities for
suburbs, small towns and communities to isolate from the virus and socio-economic tensions
unfolding in many metros. While the exodus from cities is still in the early stages, it's now
believed by at least one expert, that city dwellers could continue to flee US metros for the
next 18-24 months.
"I think the next 18 to 24 months are going to show a lot of exodus out of central
business districts, as you can expect," Hessam Nadji, president and CEO of Marcus &
Millichap, who spoke with
CNBC on Tuesday.
"We're seeing there's a lot of office vacancy, for example, in the suburbs that have now
been absorbed; there's a lot of demand for rental homes that we're seeing because people are
fleeing especially hot spots like New York, but ... you just have to keep a long-term view on
it," Nadji said.
He said over the next several years - suburban areas will see exponential demand. Already,
real estate searches for suburban zip codes surged 13% in May, according to data via
Realtor.com.
We've already noted that New York and the Bay Area are seeing residents migrate to
suburbs.
Nadji said people are also fleeing to the outskirts of Seattle and Miami.
"It was a trend that was starting to happen already over the last two or three years. You
have to remember that 60% of millennials are now in their 30s," Nadji said. "While they
really enjoyed the lifestyle of central business districts and the lack of commuting ... we
were beginning to see them migrate back out as they were getting married and having kids,"
and the "health crisis has really accelerated that pattern."
He said the outbound migration from cities would also result in businesses chasing employees
to the suburbs. Nadji said people won't "permanently" lose interest in cities - at the moment,
this is an "overreaction" to the ongoing virus pandemic.
"We saw that [demand sap] post 9/11 and those tragedies, of course, because of the
reluctance to want to locate in high-visibility high rises in downtown[s]," Nadji explained.
"Eighteen to 24 months later, that [concern] began to dissipate. So, it's a normal reaction.
I just don't think we should count out the long-term prospects of the benefits of central
business districts."
What's different today is that the country has stumbled into one of the worst public health
crises in decades, tens of millions of people are unemployed, and the entire transformation of
the economy, which includes working remotely will lead to permanent population loss for city
centers - where living standards are in declines - as well as cost of living as a Manhattan
studio costs the same as a "mansion" in the suburbs.
Guess who is most excited about this exodus? Well, baby boomers, because they
bought/built oversized McMansions , with brick on front and stucco on back, in the late
1990s and early 2000s - and whose attempts to offload this real estate has been met with poor
demand... until now.
yellowsub , 8 hours ago
It can't last for 2 years, the property bubble in many areas outside of NYC on the NJ side
is already close to peak prices before the crash... Most of these areas are not places where
you want to raise your child in their schools.
"... This gradual, almost imperceptible erosion is the essence of neofeudalism, a process of transferring political and economic power from commoners to a new Financial Aristocracy/Nobility. ..."
Our society has a legal structure of self-rule and ownership of capital, but in reality it is a Neofeudal
Oligarchy.
Now that the pandemic is over and the economy is roaring again--so the stock market says--we're heading straight
back up into the good old days of 2019.
Nothing to worry about, we've recovered the trajectory of higher
and higher, better every day in every way.
Everything's great except the fatal rot at the heart of the U.S. economy hasn't even been acknowledged, much less
addressed:
every sector of the economy is nothing but one form of
neofeudal
extortion
or another.
Let's spin the time machine back to the late Middle Ages, at the height of feudalism, and imagine we're trying to
get a boatload of goods to the nearest city to sell.
As we drift down the river, we're constantly being
stopped and charged a fee for transiting one small fiefdom after another. When we finally reach the city, there's
an entry fee for bringing our goods to market.
Note that none of these fees were payments for improvements to transport or for services rendered; they were
simply extortion.
This was the
economic
structure of feudalism
: petty fiefdoms levied extortionate fees that funded the lifestyles of nobility.
This is why I have long called America's economy
neofeudal
:
we pay ever higher fees for services that are degrading, not improving.
This is the essence of extortion:
we don't get any improvement in goods and services for the extra money we're forced to pay.
Consider higher education: costs are soaring while the value of the "product"--a college diploma--declines.
What
extra value are students receiving for the doubling of tuition and fees? The short answer is "none." College
diplomas are in over-supply, and studies have found that a majority of students learn remarkably little of value
in college.
As I explain in my book
The
Nearly Free University and the Emerging Economy
, the solution is to
accredit
the student, not the institution
. If the student learned very little, he/she doesn't get
credentialed.
Were students to have access to the best classroom lectures online (nearly free), and on-the-job apprenticeships
in the workplace, (nearly free or perhaps even paid), learning would be significantly improved and costs reduced
by 80% to 90%.
In this structure, there's no need for costly campuses or administration; the entire structure of higher education
could be largely automated with software, except for the workplace apprenticeships which focus on case studies and
real-world projects that are creating value in the here and now.
Consider healthcare: has the quality of healthcare doubled along with costs?
Are Americans significantly
healthier as the costs of healthcare have tripled? The aggregate health of Americans has arguably declined, while
the stresses placed on frontline care providers by the ever-heavier burdens of compliance and paperwork have
increased.
What about the $200 hammers and $300 million F-35 aircraft of the defense industry?
Once again, as costs
have soared, the quality and effectiveness of the products being supplied has arguable declined.
How about state and local government services? Are they improving as taxes and junk fees rise?
Once
again, government services are often declining in quality as taxes and fees increase by leaps and bounds.
In sector after sector, the quality of the goods and services has declined while costs have soared. This is the
acme of neofeudalism:
insiders and the New Nobility are skimming fortunes as prices skyrocket and the
quality of the goods and services provided plummet.
Look at the cost increases in higher education, healthcare and childcare
and ask yourself if the quality
of those services have risen in lockstep with price increases.
This is nothing but neofeudal extortion.
The cartels raise prices and we're forced to pay them, just as
feudal commoners were forced to pay.
But extortion isn't the only feature of neofeudalism that is leading to collapse.
Just as important is
the slow erosion of commoners' self-rule and ownership of meaningful, productive capital.
This gradual, almost imperceptible erosion is the essence of neofeudalism,
a process of transferring
political and economic power from commoners to a new Financial Aristocracy/Nobility.
If we examine the "wealth" of the middle class/working class (however you define them, the defining characteristic
of both is the reliance on labor for income, as opposed to living off the income earned by capital), we find the
primary capital asset is the family home, which as I have explained many times, is unproductive--in essence, a
form of consumption rather than a source of income.
In a globalized, financialized economy, the only capital worth owning is mobile capital, capital that can be
shifted by a keystroke to avoid devaluation or earn a a higher return.
Housing and pensions are "stranded capital," forms of capital that are not mobile unless they are liquidated
before crises or expropriations occur.
I am also struck by the ever-rising barriers to starting or even operating small businesses, a core form of
capital, as enterprises generate income and (potentially) capital gains. (The pandemic has only increased barriers
that were already high.)
The capital and managerial expertise required to launch and grow a legal enterprise is significant, which is at
least partly why a nation of self-employed farmers, shopkeepers, artisans and traders is now a nation of employees
of government and large corporations.
What sort of capital can be acquired by the average commoner now?
Enough to match the wealth and
political power of financial Nobility?
Summary: "The U.S. government does not represent the interests of the majority of the country's citizens, but is
instead ruled by those of the rich and powerful, a new study from Princeton and Northwestern universities has
concluded."
Neofeudalism is not a re-run of feudalism. It's a new and improved, state-corporate version of indentured
servitude.
The process of devolving to feudalism required the erosion of peasants' rights to own
productive assets, which in an agrarian economy meant ownership of land.
Ownership of land was replaced with various obligations to the local feudal lord or monastery-- free labor for
time periods ranging from a few days to months; a share of one's grain harvest, and so on.
The other key dynamic of feudalism was the removal of the peasantry from the public sphere. In the pre-feudal era
(for example, the reign of Charlemagne), peasants could still attend public councils and make their voices heard,
and there was a rough system of justice in which peasants could petition authorities for redress.
From the capitalist perspective, feudalism restricted serfs' access to cash markets where they could sell their
labor or harvests.
The
key feature of capitalism isn't just markets-- it's unrestricted ownership of productive assets
--land,
tools, workshops, and the social capital of skills, networks, trading associations, guilds, etc.
Our system is Neofeudal because the non-elites have no real voice in the public sphere, and ownership of
productive capital is indirectly suppressed by the state-corporate duopoly.
Our society has a legal structure of self-rule and ownership of capital, but in reality it is a Neofeudal
Oligarchy.
The decline is visible, and so is the trajectory to collapse.
The unprecedented implosion of U.S. commercial real estate during the coronavirus pandemic
is likely to get worse as newly delinquent CMBS loans are surging as the list of retail store
closures continues to rise.
Trepp's June
CMBS remittance report showed CMBS delinquencies hit a high of 10.32%, not seen since 2012.
It was noted that that retail CRE loans were in rough shape.
Many retail shops are heavily indebted, some have already declared bankruptcy, while others
are quickly shrinking their operating size, by reducing store footprint to rein in cost as the
virus-induced recession, blended with a plunge in consumption, along with a shift to online, is
resulting in a rapid acceleration of the retail apocalypse.
Coresight Research's latest forecast has
upwards of 25,000 retail stores could close by year end.
Forbes has released an updated list of confirmed store closures. So far, it looks like
8,708 store units have or will shutter operations this year, and could quickly surpass 2019
totals of 9,302, in a matter of months.
With thousands of retail stores closing and the economy contracting, the next conversation
Wall Street will have is about deep economic scarring and permanent job loss.
Already, 3
million jobs have been eliminated from the economy, some of which have come from the
closure of retail stores. The bad news about permanent job loss is that it's a consumption
killer, resulting in less spending at retailers, suggesting an even greater amount of store
closures beyond anyone's wild guess could be seen over the next 12-24 months.
This all suggests there's no V-shaped recovery this year - one might want to hunker down for
a prolonged downturn, as explained here
.
"... I would submit that the legitimacy of the elite professional and managerial classes is being called into question, for want of performance or any sense of responsibility. The urban PMC are the core constituency of the establishment Democratic Party. The vestigial working class elements and the ideological Left are distant memories and oppressed minorities seeking social justice, mere props. ..."
"... The thing is, the political classes -- the millionaire media pundits, the politicians, the lobbyists, the generals, the journamalists, the manipulative political operatives and propagandists, the pious policy "experts", the highly paid executives and financial managers running monopolies into the ground and non-profits into irrelevance -- they have enacted their neo-liberal agenda and it doesn't work. ..."
"... This in a country that cannot manufacture PPE. Or win a war. Trump, in his fumbling way, might get the U.S. out of Afghanistan, but the NY Times -- who brought us WMD not that long ago -- reports the Russians are paying bounties on American soldiers killed. No report on the treatment of Julian Assange though. Boeing is going to get the 737 Max in the air real soon now. Citibank is borrowing at 0.03 from the Fed and lending to credit card users at 27% and may be insolvent. ..."
"... So, let us assume the Democrats, after nominating an elderly SOB who had a hand in the crime bill that gave the U.S. the highest incarceration rate in the world, the bankruptcy bill that saddled tens of millions with credit card and student debt that cannot be discharged, and every stupid war of the last nearly twenty years, will suddenly see the necessity of radical change. And, after making an alliance with conservative Republicans hostile to even Trump's fake populism in order to elect Biden, seeing the light on radical reform is so likely! So plausible. ..."
mainstream Democrats recognize the need for radical change, and Biden will align with
the mainstream position as he always has done
You said you would leave this, your third assumption, to comments, so here is my
comment.
The U.S. is in the midst of a deep legitimacy crisis and contrary to popular belief among
liberals, it is not Trump particularly whose legitimacy is being called into question. Oh,
sure, there have been relentless attacks on him -- from partisan opponents and from much of
mainstream media -- but like the "anti-racism" of the recent protests -- much of it is
dissembling and distraction. Charges of colluding with Putin to win the 2016 election turned
out to be fake news -- rather obviously so from the beginning -- but a big enough mob went down
that path with no self-awareness. I am not saying Trump is not an egregiously bad President; he
is. But, notice please, before you go assuming that mainstream Democrats are going wake up in
2021 wanting to govern in the real world , that they have not shown much inclination toward
truth-telling or critical realism these last 20 years.
It is July. By January 2021, the U.S. economy will have suffered a structural collapse in
multiple sectors. That is the economic consequence of the pandemic. Restaurants, shopping
malls, bars, colleges, hotels, airlines, cruise lines -- easily 15% of the workforce will be
unemployed and another 25% seriously underemployed.
Did I mention that the U.S. is undergoing a legitimacy crisis?? Whose legitimacy is being
called into question?
I would submit that the legitimacy of the elite professional and managerial classes is being
called into question, for want of performance or any sense of responsibility. The urban PMC are
the core constituency of the establishment Democratic Party. The vestigial working class
elements and the ideological Left are distant memories and oppressed minorities seeking social
justice, mere props.
I would say the Party establishment is confident they can put the
re-animated corpse of Biden into the White House. And look how gleefully they welcome
Republican never-Trumpers into the clubhouse! If you were one of the fools and tools who
thought Obama did not want Republicans to control Congress, you are getting another chance to
see how the Obama Alumni Association works with the Lincoln Project, how happy they are to
deliver the kind of policy that appeals to rich, old, suburban Republican women.
The thing is, the political classes -- the millionaire media pundits, the politicians, the
lobbyists, the generals, the journamalists, the manipulative political operatives and
propagandists, the pious policy "experts", the highly paid executives and financial managers
running monopolies into the ground and non-profits into irrelevance -- they have enacted their
neo-liberal agenda and it doesn't work.
We have just watched the once highly touted CDC completely botch the great Pandemic. They
could not devise a test. They screwed up the rules on who could or should be tested. They lied
early on about the need to wear masks. They staged a moral panic over a need for ventilators,
when ventilators are a terrible therapeutic alternative. In the new Puritanism, they shut down
public beaches but they watched passively as liberal heroes like Cuomo set off a holocaust by
sending COVID-19 patients to nursing homes.
This in a country that cannot manufacture PPE. Or win a war. Trump, in his fumbling way,
might get the U.S. out of Afghanistan, but the NY Times -- who brought us WMD not that long ago
-- reports the Russians are paying bounties on American soldiers killed. No report on the
treatment of Julian Assange though. Boeing is going to get the 737 Max in the air real soon
now. Citibank is borrowing at 0.03 from the Fed and lending to credit card users at 27% and may
be insolvent.
So, let us assume the Democrats, after nominating an elderly SOB who had a hand in the
crime bill that gave the U.S. the highest incarceration rate in the world, the bankruptcy bill
that saddled tens of millions with credit card and student debt that cannot be discharged, and
every stupid war of the last nearly twenty years, will suddenly see the necessity of radical
change. And, after making an alliance with conservative Republicans hostile to even Trump's
fake populism in order to elect Biden, seeing the light on radical reform is so likely! So
plausible.
And, what's the play? The carrot of bi-partisan cooperation coupled with the fearful stick
of abolishing the filibuster someday somehow if they don't play nice. You do realize that only
Republicans are allowed to manipulate the filibuster and only in ways that favor their agenda
of, say, stacking the courts? And, the strategic vision? Reinforcing the Rube Goldberg
contraption which is Obamacare? You do know Biden is on record as adamantly opposed to
Medicare4all? And, that Medicaid is a need-based nightmare of controlled deprivation? In a
country where public health is such a shambles that a pandemic is running out of control.
'All the attention in this thread so far has been on the political dimension of uncertainty,
but it seems to me the public health dimension is also crucial and quite up in the air. What
will the trajectory of the virus look like in the US over the next several months? Will
infections continue to explode out of control?'
Not just the public health, but the economic effects of the public health. As I pointed out
in a previous thread, it's not difficult to work out why Trump looked like he was going to win
in January: the stock market was booming, unemployment was low, crime was low, there were no
new wars it's not a mystery.
People vote with their wallets.
If Trump someone manages to face down the neo-liberals in his own party and arrange for a
gigantic stimulus bill (bigger than the last one) and keeps 'benefits' going past August, he is
in with a shout. If he doesn't, and if the economy continues its path to free fall, he will
lose.
People vote with their wallets. It is not difficult. You don't need to invoke Russia and
etc. to work out why Trump won in 2016 (the impact of the Obama stimulus package, which was too
small, hadn't et 'percolated through' to people's bank balances at that point). And, if Trump
loses in 2020, the reasons will be self-evident and nothing to do with 'people seeing through
him' or 'brave liberals averted a turn to fascism'. If he loses it will be because he screwed
up on the 'good' economy.
Three time best-selling book author Nomi Prins says long before the Covid 19 crisis, the
global economy was faltering big time. The Fed stepped in with the start of massive money
printing in late 2019 to save the day.
Prins explains, " We were already in crisis mode as I mentioned at the end of my last book
going into 2019."
"What did we see at the end of 2019? We saw this pivot, and I call it phase two. . . .
Central banks had pivoted to easing mode . . . . Come September, October, November and
December, the Fed is producing repo operations. Those are short-term lending operations
that are supposed to be the purview of the banks . . . . The Fed is not supposed to get
involved, but it did. The Fed had all kinds of excuses. It said it was not QE, but it was.
. . . The debt at the end of 2019 for the world was three times GDP. For every $3 borrowed,
only $1 of economic activity occurred. That's what we started 2020 with. Throw a pandemic
into that . . . and you have a long drawn out financial and economic crisis."
Now, the money printing has gone into overdrive to save the system from the virus crisis.
The social and economic damage, according to Prins, is profound and not going away. Prins
points out,
"We are not going to pay back this debt, and this is global. Nobody is even considering
trying to pay back the debt that has been created. Let's think about why that debt has been
created. It's not just because the economy slowed down. That's one reason and kind of an
excuse. The reality is the Fed is on steroids, and other central banks are on steroids . .
. throughout the world in a larger number and larger magnitude than in the wake of the
financial crisis of 2008. This means all this new debt created is even cheaper than the
debt created going into the 2008 crisis. So, more debt, created more cheaply, means less
incentive to pay it back and more incentive to push it down the road and grow it. You've
got this snowball of debt rolling down this high mountain, and it's rolling and growing and
getting bigger. The mountain, which is the main street economy, is coming down as the snow
ball is coming down, and the main street economy itself, that foundation, is really shaky.
. . . How does this end? It ends with us, the foundation, which is the main street economy,
by both that snowball of debt and the avalanche of the mountain. That's going to be a
multi-decade problem. "
Prins says this next stage has a brand new name and explains,
" I call this a 'Permanent Distortion.' I have not used this term in prior books, but I
am using it because . . . the disconnect between financial assets, equity markets and the
real economy . . . has become massive ...
There is going to be this endless supply of artificial stimulation into the markets. . .
. Former New York Fed President Bill Dudley said the Fed's balance sheet is going to $10
trillion. That's what I have been saying, and now he finally said it. That's not going away
anytime soon. That's not being unwound anytime soon. That becomes permanent lift to
financial assets . . . . In the wake of that, less real capital gets used for
infrastructure, research and development, growth and retooling the economy and getting jobs
into this new period."
Prins says gold prices are going to "follow the expansion of the Fed's balance sheet." It
is that simple, and Prins predicts,
"As we saw in the wake of the financial crisis of 2008, gold and silver will have the
ability to go up quite substantially as the Fed's book increases in size, which we know it
is going to do. We have been told that multiple times by many different words by Federal
Reserve Chairman Jerome Powell."
In closing, Prins says, " We are continuing to drive up asset bubbles where we don't have
the real economy to back it up..."
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"The more this 'Permanent Distortion' gets bigger, the more the likelihood the next
crisis will happen... and it will be from a higher height. It will be from a larger bubble,
a bigger snowball accelerating downward more quickly. I don't think we are out of this
crisis. I think the markets are going to have a bumpy ride as the economy has a bumpier
ride ."
Join Greg Hunter as he goes One-on-One with three time best-selling author Nomi Prins.
The Central Banks will buy up the debt and then liquidate it. Some currencies may be
re-issued. Get over it. Not the end of the world.
hugin-o-munin , 20 minutes ago
I used to listen closely to what Nomi said before but now it is only more of the usual
talk. The world is a very slow place and it takes a long time until new realizations spread
but when they do there is little possibility to stop it. Right now the USD is dying as a
world reserve currency. It is slow and strictly kept away as a talking point in media.
The US behaves and continues down a path that is only accelerating this process because
it is not up to the US what happens to the USD, it is up to the rest of the world. This is
a truth that no American wants to accept but it is a fact. The more aggressive and arrogant
the US becomes the faster this will happen and a part of me thinks that is precisely the
plan. It will not matter what either the Fed or Treasury does.
Nomi talks about price inflation hitting smaller and poorer nations right now but
doesn't even come close to the fact that this is also happening in the US right now albeit
much slower. Greg Hunter was too stuck on finding ways to praise Trump as usual to even
push this question, if he even recognized it. The gospel from Wall Street and most
certainly Goldman Sachs that the USD can never be questioned is all over this interview and
which is why these 'former' truth tellers are just that - former.
algol_dog , 35 minutes ago
Futures at new highs tonight. This week will break S&P highs for the year. Amazing
time ...
Motorhead , 40 minutes ago
We've been hearing the same old stuff for easily 10-15 years from Jim Willie, Eric King,
Peter Schiff, various/numerous gold bugs. et al., ad nauseam. Yeah, one day, they might be
right, but repeating the same mantra for over a decade, one is bound to be right
eventually.
Balance-Sheet , 54 minutes ago
If it is permanent it is reality not a distortion and this is the point. The 1900s are
long over and will not be returning nor will the 1800s be returning for that matter.
Will the National Debt ever be paid off? No and there was never any intention to do
so.
The Fed is in charge and does not need to account to anyone other than Congress and its
Banking and Budgeting committees therefore provides explanations it hopes people can
understand though this might be ill advised in and of itself.
Will the Fed balance sheet go to 10T? It might but only if it seems necessary and that
depends of future circumstances which in very fluid conditions cannot be forecast
accurately especially when politicians snap the economy on and off again and again.
Do taxpayers have to pay back the Fed balance sheet? No.
Does the US Treasury or the Fed crowd out private investment making it less available or
at higher interest rates. NO! and obviously not, right? Everyone can see that.
The Gold Standard is o-v-e-r and there are no practical limitations to the amount of
dollars that can be authorized by Congress to the level deemed necessary.
Doesn't this mean the USG will issue unlimited e-dollars? No, anything can happen in a
thought ex
