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“When the capital development of a country becomes a by-product
of the activities of a casino, the job is likely to be ill-done.”
John Maynard Keynes
"Life is a school of probabilities."
Walter Bagehot
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.
Still I hope it plays a small but important role: to warn about excessive risk taking by 401K investors in neoliberal economic system. It designed to serve as a warning sign and inject a skeptical note into MSM coverage. There are not many such sites, so a warning about danger of taking excessive risk in 401K accounts under neoliberalism has definite value. The following cartoon from 2008 illustrated this point nicely
As far as I know lot of 401K investors are 100% or almost 100% invested at stocks. Including many of my friends. I came across a very relevant to this situation joke which nicely illustrated the ideas of this page:
Seven habits that help produce the anything-but-efficient markets that rule the world by Paul Krugman in Fortune.
1. Think short term.
2. Be greedy.
3. Believe in the greater fool
4. Run with the herd.
5. Overgeneralize
6. Be trendy
7. Play with other people's money
I would like to stress again that it is very difficult to "guess" when the next wave of crisis stikes us: "A thing long expected takes the form of the unexpected when at last it comes".
But mispricing of risk in 401K accounts is systemic for "overbullish" 401 investors, who expect that they will be able to jusp of the train in time, before the crash. Usually such expectations are false. And to sell in the market that can lose 10% in one day is not easy psychologically. I remember my feelings in 2001-2002 and again 2008-2009. That's why many people who planned to "jump" stay put and can temporarily lose 30 to 50% of value of their 401k account in a very short period of time (and if you think that S&P500 can't return to 1000, think again; its all depends on FED). At this point some freak out and sell their holdings making paper losses permanent.
Even for those who weathered the storm and held to their stock holdings, it is important to understand that paper losses were eliminated mostly by Fed money printing. As such risks remains as at one point FED might find itself out of ammunition. The fact that S&P500 recovered very nicely it does not diminish the risk of such behavior. There is no guarantee that the third crisis will behave like previous two.
Next crash will have a new key determinant: the attitude toward the US government (and here I mean the current government of Barack Obama) and Wall Street after 2008 is the lack of trust. That means that you need to hope for the best but prepare for the worst. Injection on so much money into financial system was a novel experiment which is not ended yet. So how it will end is anybody's guess. We are now in uncharted waters. I think when Putin called Bernanke a hooligan, he meant exactly this. Since Bernanke was printing money out of thin air to buy financial paper, his action were tantamount to shoplifting. In some way this probably is more similar to running meth labs inside Fed building. The system was injected with narcotics. Everybody felt better, but the mechanism behind it was not healthy.
The complexity of modern financial system is tremendous and how all those new financial instruments will behave under a new stress is unknown. At the same time in the Internet age we, the great unwashed masses, can't be keep in complete obscurity like in good old time. Many now know ( or at least suspect ) that the neoliberal "show must goes on" after 2008 is actually going strongly at their expense. And while open rebellion is impossible, that results in lack of trust which represents a problem for financial oligarchy which rules the country. The poor working slobs are told be grateful for Walmart's low (poverty-subsidized) prices. Middle class is told that their declining standard of living is a natural result of their lack of competitiveness in the market place. Classic "bread and circuses" policy still works but for how long it will continue to work it is unclear.
But nothing is really new under the sun. To more and more people it is now clear that today the US is trying to stave off the inevitable decline by resorting to all kinds of financial manipulations like previous empires; yesterday, it was the British Empire and if you go further back, you get the USSR, Hapsburg empire, Imperial Russia, Spanish empire, Venetian empire, Byzantium and Roman empire. The current "Secretary of Imperial Wars" (aka Secretary of Defense) Ashton Baldwin Carter is pretty open about this:
“We already see countries in the region trying to carve up these markets…forging many separate trade agreements in recent years, some based on pressure and special arrangements…. Agreements that…..leave us on the sidelines. That risks America’s access to these growing markets. We must all decide if we are going to let that happen. If we’re going to help boost our exports and our economy…and cement our influence and leadership in the fastest-growing region in the world; or if, instead, we’re going to take ourselves out of the game.”
For the US elite it might be a time to rethink its neocon stance due to which the US is exposing ourselves to the enmity of the rising economic powers, and blowing serious cash to maintain it hegemony via maintaining huge military budget, financing wars and color revolutions in distant countries. In a way the US foreign policy became a financial racket, and racket can't last forever because it incite strong opposition from other countries.
Neoliberalism (aka casino capitalism) as a social system entered the state of decline after 2008. Like communism before it stopped to be attractive to people. But unlike communism it proved to have greater staying power, surviving in zombie state as finanfial institutions preserved political power and in some cases even enhanced it. It is unclear how long it will say in this state. Much depends on the availability of "cheap oil" on which neoliberal globalization is based.
But the plausible hypothesis is that this social system like socialism in xUSSR space before entered down slope and might well be on its way to the cliff. Attempts to neo-colonize other states by the West became less successful and more costly (Compare Ukraine, Libya and Iraq with previous instances of color revolutions). Some became close to XIX century colonial conquests with a lot of bloodshed (from half million to over a million of Iraqis, by different estimates, died ). As always this is mainly the blood of locals, which is cheap.
Libya and Ukraine are two recent examples. Both countries are now destroyed (which might be the plan). In Ukraine population is thrown in object poverty with income of less that $5 a day for the majority of population. And there is no other way to expand markets but to try to "neo-colonize" new countries by putting them into ominous level of debt while exporting goods to the population on credit. That is not a long term strategy as Greece, Bulgaria, and now Spain and Portugal had shown. With shrinking markets stability of capitalism in general and neoliberalism in particular might decrease.
Several researchers points to increased importance Central banks now play in maintaining of the stability of the banking system. That's already a reversal of neoliberal dogma about free (read "unregulated") markets. Actually the tale about "free markets", as far as the USA is concerned, actually was from the very beginning mainly the product designed for export (read about Washington consensus).
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Aug 21, 2017 | www.moonofalabama.org
Charles R | Aug 20, 2017 5:44:06 PM | 7
I have used Simone Weil's " On the Abolition of All Political Parties " in a philosophy class. Her argument, as I'll try to summarize: the impetus to grow and gain size and influence is essential to any political party, and sustaining this inertia overrides the thinking and living of the individual in favor of the coherence of the party itself as a mass; thus, we must eliminate the political party.
My students found this "contradictory" or "stupid." People, they tell me, will naturally form groups, and because of this the group will operate just like she's claiming parties do, so she's not really saying how to get rid of this. I point out that she's very deliberate to talk about fluids versus crystals, between how things form associations that are fluid , and thus on some issues folks connect on on others they disconnect without the pressure to sustain these changes as a stable identity !she points to literary circles as groups that ebb and flow with members and associations that do not conform to the logic of the political party. These are distinct from associations that are crystal , where aggregation and homogeneity and stable arrangement are more important for the whole to remain itself. So, I take it my students, despite getting up in one class, walking around campus, and sitting down in another class, believe that there is little to no difference in one collection over another so long as the reason for the collection is what defines the collection . (How they take their intuition as expressed in my class and think through intersectionality as expressed in another class is something I was trying, through conversations with them, to work out, because I find it helps me when I find my own intuitions about all of this so very different from theirs.) But I think the implicit part of their reasoning was that all of this dealt with force, the force they feel inside as pressure to conform on the outside with others, who are at this point for them undeniably also undergoing these inward pressures to regulate their outward expression.
But then I point out that music, or sports, or lovemaking, or dance, or a lot of other ordinary things we do enjoyably with others, show us how to form and move through groups because we share a similar drive or interest in something outside of both of us, and they seem to get that idea. I find myself coming back to this website just to read the comments, because I find it a refreshing change of pace, a host of interesting exchanges, and a good opportunity to face the perennial challenge of sitting within conflict, finding reasonable the disagreeing voice, and owning what makes myself uncomfortable with strangers.
If enough people share the desire to talk about things from conflicting perspectives, the conversations continue, but as people move in and out, the conversation itself changes and evolves. To shut down the conversation is to lock it in place, to keep it rigid and total. To walk away from the conversation in good spirits, is to hope that it will continue, in some spirit, some form, resembling how it was going before. To walk away from the conversation in bad spirits, is to hope it will change into something that either once was !in which case it can't naturally and so only through artifice! or should be !in which case, being based on the limitations of our own perspective, won't be open for the wonderful possibility of something entirely new and inconceivable happening in a conversation.
I sometimes wish politics were just conversations. I found Hannah Arendt to be one of the few thinkers who set the terms in such a way that I was liberated. Leftist thinking taught me a lot about fashion, I didn't realize until later. Paleoconservative thinking taught me a lot about how much either gets suppressed or gathers dust in the libraries, and yet still smolders underneath the haunted foundations of our civilization. I come back to Zhuangzi over and over again. I come back to these rambling conversations under heaven, over earth, within the noosphere.
But eventually the conversation does end, and you have to hammer a nail to keep the walls up. Winter is coming. Wood needs cutting. Grains need grounding. Papers need grading.
PavewayIV | Aug 20, 2017 10:19:52 PM | 17
Charles R@7 - Well said, Charles R. I loved this quote from Weil's book in one of the reviews of On the Abolition of All Political Parties:
"Political parties are a marvellous mechanism which, on the national scale, ensures that not a single mind can attend to the effort of perceiving, in public affairs, what is good, what is just, what is true. As a result – except for a very small number of fortuitous coincidences – nothing is decided, nothing is executed, but measures that run contrary to the public interest, to justice and to truth."Not sure I'm sold on eliminating them - this is another call to kill some of the existing victims in a futile effort to eliminate an infectious disease that permeates public affairs. It will irritate power- and control-seeking psychopaths temporarily. Political parties are just a convenient 'easy' button for them.
US society's problem is a child-like belief in some kind of magical innate integrity of organizations that feed us public affairs 'information' despite those organizations being obvious targets for exploitation. Part of psychopath's successful control and exploitation of the public is to obscure the fact that they are being controlled and exploited.
It's lonely here in tin-foil hat land, but I'm starting to see more visitors. I think our 'Taco Tuesday' promotion is starting to pay dividends!
psychohistorian | Aug 20, 2017 10:49:30 PM | 20
@ PavewayIV with his Taco Tuesday Tin Foil Hat promotion in response to Charles R@7 comment about political parties
I am reminded of the movie "Being There" with Peter Sellers as Chauncy Gardner. Chauncy Gardner has spent enough of his life inside so that when forced out on the street he carries a TV remote control and tries to change the channel when the situation starts to get dicey......Unfortunately, I see most Americans responding like Chauncy Gardner and keep banging on their TV remotes hoping the reality they see changes.
Does Waco Wednesday follow Taco Tuesday? or are you staying with a food meme?
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Aug 18, 2017 | www.moonofalabama.org
Tay | Aug 18, 2017 6:56:05 AM | 82
The US has no problem generating wealth, and has no need to force conflict with China. The US's problem is that that wealth is funneled upwards. Wealth inequality is not a meme. "Shrinking middle class" is a euphemism for downward-mobility of the middle class, an historical incubator for Reaction. And that's what we have here, reactionaries from a middle class background who now are earning less than their parents at menial jobs, or who are unemployed, becoming goons; aping the klan, appropriating nazi icons, blaming the foreigner, the negro, the Jew, the Muslim, for their circumstances. A "trade war" will not help them one iota, it will make their lives worse, and Bannon will go out and say it's the fault of the foreigner and the immigrant, their numbers wool swell. More terror, depper culture wars. I suppose that's nationalism to some people.
Grieved | Aug 18, 2017 9:51:21 AM | 83
somebody | Aug 18, 2017 11:00:25 AM | 86@82 Tay
That's exactly nationalism, for sure. The work of that wealth creation by the way is done by the all the classes below the rentier class, from working to middle class. The funneling upwards thing is actually theft.
The middle class is shrinking and being pushed down closer to rage because the wealth-stealing mechanisms have become bigger and better, and saturated the entire national system, including its electoral politics. This real face of capitalism has driven out the iconic American Dream, which was the essence of upward mobility.
Nationalism is an ugly word, but it's easily reached for when there aren't any better words around. In Russia, they already went through what faces the US, and they figured it out.
Since we're looking for the grown-ups, let's turn to Vladimir Putin, always reliable for sanity when direction is lost.
Putin recalled the words of outstanding Soviet Russian scholar Dmitry Likhachev that patriotism drastically differs from nationalism. "Nationalism is hatred of other peoples, while patriotism is love for your motherland," Putin cited his words.-- Putin reminds that "patriotism drastically differs from nationalism"
83Noirette | Aug 18, 2017 11:56:04 AM | 90
Upward mobility has fallen sharply"In our view, faster growth is necessary but not sufficient to restore higher intergenerational income mobility," they wrote. "Evidence suggests that, to increase income mobility, policymakers should focus on raising middle-class and lower-income household incomes."Interventions worth considering include universal preschool and greater access to public universities, increasing the minimum wage, and offering vouchers to help families with kids move from poor neighborhoods into areas with better schools and more resources, they said.
Is there any political party or group in the US that suggests this?
The Corporate "fascist" - with grains of salt - USA. The 'democracy' part is fiction, camouflaged via a fools theatre two-party system and ginormous social re-distribution, amongst others.. the Core (PTB) found itself through miscalculation and loss of power subject to a challenger who broke thru the \organised/ fake elections, to attempt some kind of re-adjustement - renewal - re-set - review...Advocating smoothed-out relations with Russia (for commercial perso reasons, Tillerson, etc. and a need to grade adversaries and accept some into the fold, like Russia, instead of Iran ), a more level playing field, multi-polar world, to actually become more dominant in trade (China etc.) and waste less treasure on supporting enemies, aka proxy stooges, to no purpose (e.g. Muslim brotherhood, Al Q kooks, ISIS) and possibly even Israel ! hmmm.
Heh, the profits of domination are to be organised, extracted and distributed, differently. One Mafia-type tribe taking over from another! Ivanka will be The Sweet First Woman Prezzie! Style, Heart, Love, Looks! Go!
The old guard will do much to get rid of the upstart and his backers (who they are exactly I'd quite like to know?) as all their positions and revenues are at risk, so they are activating all - anything to attack. The Trump crowd seems at the same time both vulnerable and determined and thus navigating à vue as the F say, by sight and without a plan An underground internal war which is stalemated, leading to instrumentalising the ppl and creating chaos, scandals, etc.
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Aug 10, 2017 | www.moonofalabama.org
Bolt | Aug 5, 2017 1:40:54 AM | 50
Only two continents for this one; and yes, critical thinking either not taught or discouraged.
I have found Usaian's particularly lacking in this skill; especially the last 50+ years.
John Gatto has traced the roots of western education back to the Hindu schools in India; teaching docility and obedience. His book, The Underground History of American Education, is superb.
Posted by: V. Arnold | Aug 5, 2017 4:28:14 AM | 53
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Jul 30, 2017 | jessescrossroadscafe.blogspot.com
With low inflation and continuing stagnation in median wages another housing bubble is just what the doctor ordered as a cure for the last financial crisis, caused in part by the rampant financial fraud associated with Housing Bubble 1.0.
And it looks like we have yet another tech stock bubble well underway.
Meanwhile the public is distracted by the corporate media's endless coverage of clown car antics and foreign plots to pollute our precious bodily fluids.
Well done, elites, well done.
And no one could have seen it coming, again.
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Jul 30, 2017 | jessescrossroadscafe.blogspot.com
"A horse walks into a bar, the bartender says, 'Why the long face?'"
And so we had both an FOMC and a precious metals option expiration on the Comex today.
Let's see if we get any post-FOMC, post-expiration shenanigans for the rest of the week. Once gold breaks out it could be tough to stop, although I am not liking the small advances it has been making on such steady dollar weakness.
Stocks are continuing to edge higher, although with a big less verve than previously.
Pundits are now saying that a crash is probably at least two months away, so now is a good time to buy more stocks.
You cannot make this stuff up.
I think the theory is that when the Fed starts unwinding their balance sheet in September, that the air of liquidity, which is one of key components of these bubbles, is going to start coming out of the markets much faster than it went in.
And the result may be terrific! not with a bang, but a whimper.
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Jul 30, 2017 | www.nakedcapitalism.com
By Carol Graham, Leo Pasvolsky Senior at the Brookings Institution and College Park Professor in the School of Public Policy at the University of Maryland. Originally published at VoxEU
Despite the long-held belief that high levels of inequality in the US signal future opportunity, a number of studies suggest that this is no longer the reality. This column examines trends in inequality from the perspective of well-being and focuses on non-economic aspects of welfare, including hope. The results reveal stark differences across people, races, and places in the US. Poor minorities – and blacks in particular – are much more hopeful than poor whites, while urban places are more hopeful than are rural ones, as are places with higher levels of diversity.
The US is as divided as it has ever been. The simplest marker – which has been a topic of discussion among economists for many years – is the stark increase in inequality of both income and opportunity. A number of studies provide compelling evidence that despite the long-held belief that high levels of inequality in the US signal future opportunity, that is no longer the reality. Chetty et. al. (2017) find that the percentage of children who are able to rise above the income levels of their parents has fallen from 90% for cohorts born in 1940 to 50% for those born in 1980. Yet technical discussions among economists based on metrics such as Gini coefficients do not seem to resonate in public debates.
Divisions in the US go well beyond the income arena, and in ways that are particularly worrisome. In a new book, I document trends in inequality from the perspective of well-being, starting with standard metrics but also exploring how these relate to non-economic aspects of welfare, such as happiness, stress, anger, and, most importantly, hope (Graham 2017).
Hope is an important channel driving people's willingness to invest in the future. My early research on well-being work highlights its particular importance for people with less means, for whom making such investments requires a greater sacrifice of current consumption than it does for the rich (Graham et al. 2004). In addition to widening gaps in opportunity, the prosperity gap in the US has led to rising inequality in beliefs, hopes, and aspirations, with those who are left behind economically the least hopeful and the least likely to invest in their futures.
A Tale of Two Americas
There are, indeed, two Americas. Those at the top of the income distribution (including the top of the middle class) increasingly lead separate lives, with barriers to reaching the upper class being very real, if not explicit (Reeves 2017). Those at the top have high levels of hope for the future and make investments in themselves and in their children's health, education, and knowledge more generally. Those at the bottom have much lower levels of hope and they tend to live day by day, consumed with daily struggles, high levels of stress, and poor health.
There are many markers of the differences across these two Americas, ranging from education levels and job quality to marriage and incarceration rates to life expectancy. Indeed, the starkest evidence of this lack of faith in the future is the marked increase in premature deaths – driven largely but not only by an increase in preventable deaths (such as via suicide and drug over-dose) among middle-aged uneducated whites, as described by Case and Deaton (2017).
There are even differences in the words that these two Americas use. Common words in wealthy America reflect investments in health, knowledge acquisition, and the future: iPads and Baby Bjorns, foam rollers and baby joggers, cameras, and exotic travel destinations such as Machu Picchu. The words that are common in poor America – such as hell, stress, diabetes, guns, video games, and fad diets – reflect short-time horizons, struggles, and lack of hope (Leonhardt 2015).
Based on detailed Gallup data, we find stark differences across people, races, and places in the US. Remarkably, poor minorities – and blacks in particular – are much more hopeful than poor whites. Poor blacks are three times as likely to be a point higher on the ten-point optimism scale than are poor whites, while Hispanics are about one and a half times more likely than poor whites. Poor blacks are also half as likely to experience stress – a significant marker of ill-being – on a daily basis as are poor whites, while poor Hispanics are about two-thirds as likely.
Figure 1 Odds of being on a higher level of optimism, by race group (relative to white), within each income group
Figure 2 Odds of experiencing stress, by race group (relative to white), within each income group
These differences across race have multiple explanations. One important one is that, despite substantial obstacles, minorities have been gradually narrowing the gaps with whites, at least in terms of education and life expectancy gaps. Minorities are also more likely to compare themselves with parents who were worse off than they are, while blue-collar whites are more likely to compare themselves with parents who were better off – a trend that has been increasing over the past decade, as found by Cherlin (2016). By 2016, 26% of non-Hispanic whites reported being worse off than their parents, compared to only 16% and 14% of blacks and Hispanics, respectively. Cherlin also finds that those individuals who report being worse off than their parents are less happy with their lives and less likely to trust others.
Psychological research points to higher levels of resilience among minorities compared to whites. Assari et al. (2016) find that blacks and Hispanics are much less likely to report depression and/or commit suicide in the face of negative shocks than are whites. Our research suggests that there may be an ageing effect. While younger blacks, particularly males, are more likely to be angry than their white counterparts (even though they are still more hopeful), older blacks are significantly less likely to be angry than whites.
More generally, urban places are more hopeful than are rural ones, as are places with higher levels of diversity. In recent research, Sergio Pinto and I find that the same places have healthier behaviours – such as more people who exercise and less who smoke (Graham and Pinto 2017). In contrast, we also find that the places with more respondents who lack hope for the future tend to have higher levels of premature mortality driven by 'deaths of despair', i.e. those driven by suicide and/or drug and alcohol addiction.
These differences are reflected across a range of inter-related trends, which again are more prevalent among uneducated whites. Reported pain, which is a gateway to both opioid addiction and suicide, is higher among whites than among blacks, and highest among rural whites. Reliance on disability insurance links to reported pain due to the injuries associated with many blue-collar jobs. Rates have increased in the past decades from just under 3% of the working age population to almost 5% for men. Premature mortality has increased dramatically for uneducated whites – particularly those in rural areas and small towns – compared to their black and Hispanic counterparts. A recent study finds that civic participation of all kinds is also much lower in rural areas, areas that also tend to have far less access to broadband internet (Kawashi-Ginsberg and Sullivan 2017). These rural–urban trends map remarkably closely, meanwhile, with political divisions, voting patterns, and even alternative sources of news in the US.
The figures below depict rough geographic regularities – via state averages – in the distribution of stress, reported pain, reliance on disability insurance, and premature mortality for poor white respondents (the cohort that is demonstrating the starkest signs of despair). Our econometric analysis discussed above identifies the specific role that lack of hope plays in this vicious circle.
- Figure 3 Average stress incidence (%) by state, for poor whites (2015-15 average)
- Figure 4 Average pain incidence (%) by state, for poor whites (2015-15 average)
- Figure 5 DI prevalence by state (% per adults aged 20+, 2010−15 average)
- Figure 6 Mortality rate (all-cause) by state, for whites aged 45−54 years old (per 100,000 people, 2010−2015 average
What Can Be Done to Reduce Despair?
Unfortunately, there is no magic bullet for solving widespread desperation and its negative manifestations. It is even more difficult to conceive of solutions in a political cycle that hinges on daily crises and scandals. Not surprisingly, the proposals coming out of the current administration are simply to make across-the-board cuts in social programmes – far from the creative thinking required to make these programmes part of the solution. In the short run, solutions will likely be piecemeal and bottom-up, emanating from communities themselves with support from local level political actors and organisations.
There are, of course, major policy changes that could help over the longer run. Firstly, while deaths of despair are exactly as described, the all too readily available supply of opioids and other addictive drugs is an issue that policy can productively address. Another key policy area, which I highlight in the book, is the need to re-think safety net policies in the US. Food stamps, for example, tend to stigmatise recipients, and the programmes that provide cash assistance for the non-working poor have been shrinking, particularly in Republican states. Given that 15% of prime-age males are out of the labour force – and this is projected to grow to 25% by mid-century – another approach is clearly necessary.
The technological displacement of low-skilled jobs is here to stay – and is an important issue for many countries, well beyond the US. Addressing this issue will require longer-term changes, such as education and incentives that provide the young in economic desserts the tools to move to where the new jobs are. Older displaced/out-of-the-labour-force workers pose more of a challenge. Well-being research offers some lessons, such as the benefits of volunteering, participating in community activities, and other ways of avoiding the isolation and despair that accompanies unemployment.
Finally, restoring hope is not impossible, and as a start entails reaching out to those in distress with positive strategies for the future. Experimental research, such as that by Hall and Shafir (2014) and Haushofer and Fehr (2014), shows that simple interventions that introduce a source of hope to the poor and vulnerable can alter behaviour and lead to better future outcomes. The alternative is for desperation to yield even more support for politicians fostering division, exclusion, and an impossible return to the past. The associated turmoil, as recent elections and events in both the US and the UK demonstrate, is counter-productive for all, and particularly so for the most vulnerable.
See original post for references
allan , July 29, 2017 at 2:52 am
Livius Drusus , July 29, 2017 at 4:18 amThe technological displacement of low-skilled jobs is here to stay – and is an important issue for many countries, well beyond the US. Addressing this issue will require longer-term changes, such as education and incentives that provide the young in economic desserts the tools to move to where the new jobs are.
Education, incentives, tools, new jobs.
That could be cut and pasted from a DNC press release. Coding camps for all!It seems that even the Even the Liberal Brookings still doesn't get how bad things are,
or how much fundamental restructuring of the economy and society would be needed
to reverse things.RepubAnon , July 29, 2017 at 6:54 pmThe answers are never things like reforming labor law to make it easier to unionize, renegotiating trade agreements to make them fairer to workers, fixing the trade deficit, true universal health care and perhaps the most obvious answer: have the government hire people directly!
No, it is always learn to code and move to New York or San Francisco. It is getting harder and harder to deny that Thomas Frank was right when he said that modern liberalism is now centered on upper middle-class professionals and their theory of technocratic meritocracy.
These people can't imagine any solutions that don't comport with their own experiences.The credentialed professionals earned their wealth and status through schooling and moving to one of the large metro areas where professional jobs are plentiful. They assume that everyone must follow the same path that they did because they are convinced that they have merit and others do not. They can't imagine that in some cases staying in your dying town where you at least have family networks might be a more rational option than dropping everything for a chance to "make it" in an alien city with a high cost of living. Why do the "go where the jobs are" narratives always seem to ignore the fact that large cities are becoming so expensive that the lower-paid workers who service the "knowledge workers" at Google and Facebook can't even afford to live there anymore? I guess the reason is that it would reveal the social hourglass nature of the supposedly wonderful liberal big cities.
Also, I want to call attention to the obsessive focus on men not working. Dean Baker has critiqued this meme on his blog.
- http://cepr.net/blogs/beat-the-press/nyt-discovers-that-it-is-not-just-video-games-and-internet-porn-causing-male-workers-to-drop-out-of-labor-force
- http://cepr.net/blogs/beat-the-press/the-problem-of-focusing-on-men-not-working
Americans don't need hope they need good policy. Too much contemporary political and economic analysis focuses on psychological factors. Yes, the misery and hopelessness that comes from unemployment and underemployment are real and likely fuel various social pathologies but there is nothing new or groundbreaking here.
We know from the Great Depression and the aftermath of the collapse of communism in Eastern Europe that economic problems can cause social problems. The key is to find ways to fix these problems but unfortunately the only answers we seem to get are the same ones that we have been hearing for the last 30 years.
tegnost , July 29, 2017 at 10:50 amI'd suggest that real hope, as opposed to false hope, is the answer. Real hope would result from good policies, false hope is engendered by suggesting that people do things such as learning to code (unless they have an aptitude for it). Even then, telling people that uprooting oneself and moving to a strange city to learn a new skill is hardly a realistic solution. One would need to rebuild one's life (and that of one's family), and still may not find a job at the end of that effort. These types of solutions increase despair, they don't kindle hope.
What really need to happen is a big infrastructure project aimed at getting high-speed Internet connections and decent roads to the rural areas. These would make it possible for businesses to relocate satellite offices to low-cost areas, bringing jobs. People could then either train for those jobs, or get jobs in support sectors such as supermarkets, consumer stores, etc. This would offer a realistic possibility of better times, which would help people regain real hope.
jrs , July 29, 2017 at 11:55 amI'm going to have to pile on here as well, flagging volunteerism as an elite perspective that works (possibly) only when all your needs are met and you need something to get you out of the house to connect with people, while telling a poor person they should work for free might not answer any need they have and indeed likely make them feel taken advantage of. Along the same lines a poor artist friend has fielded the suggestion that she donate her artwork to charity for exposure, as the spouse of a wealthy so californian has done, then her work can be sold to support the charity instead of herself, but exposure! (We'll leave aside that the techies just want to take a picture with their iphone 7 and they'll print it out for free)
John Wright , July 29, 2017 at 1:30 pmwhile being around people is often good advice, being around people does not fix the despair of unemployment (really a separate issue than poverty – as one can be poor and employed, unemployed and not poor although that situation clearly can not last).
The despair of unemployment is fear of NOT HAVING AN INCOME period (the present reality and the fear that one won't get a job in the future either), and being around others does not fix that, whether or not one is around fellow unemployed people or people with jobs. Because you can get company from others but no relief from the raw fear about whether one will have an income to pay bills or not, because others can not help one with this. They can merely provide company and emotional support, but that doesn't pay the bills.
Sure if for the older people social security age was lowered so they could now collect a check and then one told them to volunteer with thier free time, maybe they'd be good, but only if that need for an income is met first.
flora , July 29, 2017 at 6:13 pmVolunteerism also has the stigma that a volunteer is of a lower class because they are working for free.
I remember my late mother who was volunteering in her 80's at a charity. This charity also had paid employees. She had volunteered for a few months when one of the paid staffers asked her to get coffee for the staffer.
My mother got the coffee for her. Then my mother quit.. She said the the paid workers did not respect the volunteers' time because the volunteers were willing to work for free..
flora , July 29, 2017 at 6:26 pm+1.
flora , July 29, 2017 at 6:44 pmadding: I know of a local worthy charity that got ripped off for 10's of thousands of dollars by a paid worker. No one checked the books because, of course, the paid worker must have been reliable and serious and trust worthy. They were being paid! after all. The IRS showing up on the doorstep because of failure to report and pay taxes finally got the attention of the self-regarding and swanning board that all was not well. Several unpaid volunteers had tried to get the board's attention for a couple of years, to no avail.
Arizona Slim , July 29, 2017 at 6:37 pmadding: (why does this remind me of the CalPERS board?)
Tomonthebeach , July 29, 2017 at 3:30 amOn Facebook, there is a group for people like your artist friend. It's called Stop Working for Free and it's growing by leaps and bounds.
MoiAussie , July 29, 2017 at 4:14 amAlas, Washington keeps its head in the sand by relying on unrealistic measures of the cost of living. They do a poor job of correcting for regional differences. As an example, as Dean Baker and others have pointed out, rents for a 1-bedroom apartment in San Francisco exceed mortgage payments on a mansion in Omaha.
As long as Capitol Hill is content to go with the flow, the flow will continue downhill.
Terry Flynn , July 29, 2017 at 4:45 amI'm close to disgusted by this analysis. It shows either a complete lack of insight into root causes, or a stubborn unwillingness to speak about them. No mention of globalisation, capitalism, financial crises, housing foreclosures, predatory corporations, or corruption of law and justice. Blather about different language used in the two Americas may score points at a sociolinguistics conference, but is otherwise unilluminating. All the framing in terms of people's "willingness to invest in the future" is bogus – it should be about "ability to create futures for themselves". Only the rich have the luxury of investing, for everyone else it's the struggle to stay afloat and perhaps improve their circumstances.
It's big on "something needs to change" and "another approach is needed", but offers no new ideas. It seems entirely focused on mitigating the symptoms, such as despair and suicide, rather than identifying and addressing the causes. And it doesn't once question the idea that America is a rich land, as the title would have it, as opposed to a land where the many are ruthlessly and increasingly exploited by the few, a land where public assets are falling apart or being stolen for a song (post offices, anyone?). And the author seems surprised that communities that have long been oppressed and deprived are more resilient than those that have had recent opportunities to forget the lessons of the struggle to survive and prosper.
In the end it reads as just another tacky book promotion exercise with nothing more to offer.
Harry , July 29, 2017 at 7:56 amAgreed. Former colleague get all enthused about interventions that are supposed to help the poor to refocus on long-term outcomes (so as to reduce smoking/opioid use/whatever) / invest in the future, blah blah blah. As you say, the despair/lack of hope people have has to be addressed by concrete changes to the system that gives them either a secure job they value, (as well as both decent monetary compensation and other non-monetary support – carers immediately come to mind) or engages them in an activity that gives value to their lives, and ideally society too, if they're too ill to go back into full-time employment. "Concerns about the future" constitute around 20% of quality of life directly (and indirectly have huge effects in terms of magnifying the malign effects of financial/monetary shocks to a person's life).
" Welcome to fear .It's hope, turned inside out ." – Going Postal by Terry Pratchett
MoiAussie , July 29, 2017 at 10:41 amAh yes. They're poor because they are stupid. I am always surprised we don't explain the rich as "they're rich because they are ruthless and unprincipled".
jrs , July 29, 2017 at 12:05 pmBlunt people do say that, and so should all. Balzac said much the same 200 years ago, and christ said something to that effect about 2000 years ago.
To be fair, "they're rich because they are ruthless and unprincipled, or were born rich, or both".bvian , July 29, 2017 at 12:06 pm+1
Anon , July 29, 2017 at 5:49 pmThe system has always been rigged, maybe it's worse now than 50 years ago, maybe it's better than 100 years ago. Regardless, what changed is a business of talk radio, fox news and grievance politics that profits off of gloom and doom and specifically targets white people and rural folk. If you spend your days listening to people tell you how awful everything is, you are going to lose hope.
Jane , July 29, 2017 at 7:03 amSeems to me that people can recognize a hopeless economic situation (their own) without talk radio, Fox, or politics.
Clive , July 29, 2017 at 10:16 amIt isn't hope that is lacking; I've yet to meet anyone who doesn't hope for a better life. What has been lost is the belief that that hope will ever be realized. People no longer believe the life they would like is achievable. When there is nothing to look forward to, nothing to strive for, hope sinks and despair rises. That's why safety nets are so important, they prevent hope from being extinguished and remind people there is a way forward, a way up.
Ironically, the optimism shown by minorities may be an illusion; the result of closing the gap with a sinking white working class rather than of a real rise in their economic
state. The life they hope to achieve by catching up with the white working class is no longer the life they were told they would find.Chauncey Gardiner , July 29, 2017 at 11:29 amIt (the loss of hope) gets to a lot of us ! in different ways. I'm loathed to agree with Yves' assessment that the loss of hope is a ! what's the right word? ! necessity?
But I think Yves is right. Misplaced hope is a seductive toxin. It keeps one from making a realistic assessment of a situation and the most likely range of outcomes when analysed objectively. If you keep, irrationally, hoping for the best, you may well preclude yourself from taking more drastic but necessary steps.
The main way the lack of hope has affected me is that I cannot now happily read anything in modern literary fiction. Once I started noticing a phenomena ! which is a variation on TV houses having unreasonably large rooms or characters having a standard of living not commensurate with their jobs ! whereby the narrative of a novel is established usually in the first chapter or so, but the author has to conjure up some outrageously contrived explanation and scenarios as to how the central characters have the time and resources to participate in whatever story arc they are about to be launched upon.
Is the novel some sort of adventure? The lead characters have to be given a get-out for why they aren't tied to a job which occupies every waking hour either by working long hours or commuting (or both). Is it an urban fantasy genre? Where do the participants get their money from? If they work, what do they do which gives them the energy to pursue the plot line?
If you try to read modern fiction, watch for the sudden, hamfisted, attempts to finesse these issues. I've got cynical and jaundiced at the endless parade of antiques shop owners who can conveniently close up early when a story development needs to take place. The freelance detectives/office workers/journalists who can find themselves mysteriously between assignments but not need to look for work. The poor but honest Peggy Sues who inherit a bit of money from the convenient death of a relative.
Whenever I try to start a new modern fiction book, I brace myself for the inevitable credulity-stretching few paragraphs which have to get clumsily spliced in to achieve an explanatory fudge. I've given up hope (!) of finding one that doesn't have me throwing it in the trash.
Clive , July 29, 2017 at 11:37 amClive,
A little off-topic, but you might try a collection of short stories by Rick Bass. Just a suggestion.Yves Smith Post author , July 29, 2017 at 1:31 pmThanks Chauncey ! I've wasted so much time (and money!) trying to find something decent to read. The TV is now so annoying, to the point of unwatchability, I've given up apart from a couple of shows. BBC Radio 4 is down to a similarly small handful of programming that I actually enjoy. And I love to read, I don't like not having a book on the go, but do prefer modern rather than classical literature when it comes to fiction. So anything by way of recommendations from the likeminded folk in the cheap seats down here is like manna from heaven.
Synoia , July 29, 2017 at 3:33 pmIf you haven't read it already, the better (not influences by Tolkein and post the 1950s-1960s SF) that is not obsessed with science and gadgetry might appeal to you. They use other worlds as frameworks to put humans or human-like creatures in social situations different than ours and play out the behaviors.
Many readers have said they regard Ursula LeGuin's The Dispossessed as one of the ten most important books every written about politics. Her The Left Hand of Darkness is also a classic. The space opera A Deepness in the Sky by Vernor Vinge is a great book. Readers probably have suggestions outside warhorses like these.
jsn , July 29, 2017 at 11:51 amYes, the characters on Tolkien have the flexibility to wander off without notice, and seem to only eat once every few chapters.
I'd recommend Cyril Kornbluth's The Syndic as a good description of our current utopia. Prescient almost.
I do not read Science Fiction any more. I do not have the correct optimistic view of the future I once had.
I share Clive's irritation? dislike? of the contrived scenarios which do not account for having to work (including the commute) 11 to 15 hours a day.
I'd point out that fiction in the past generally revolved around the class formerly known as "The Idle Rich."
I suggest for fun read "Diary of a Country Parson" by Woodforde. Pay particular attention to his description of meals.
Dandelion , July 29, 2017 at 11:57 amI think it was Shaw who said, "cynicism is a word frequently used to describe accurate perception by people who don't have it."
jrs , July 29, 2017 at 12:13 pmVery few American writers deal with class reality. I recommend "American Rust," by Philip Meyer, "The Beans of Egypt, Maine," by Carolyn Chute, and, for the office workers, "And Then We Came To The End," by Joshua Ferris.
jrs , July 29, 2017 at 12:08 pmi can just imagine reading these and wanting to kill myself though entertainment that provides no escape from reality – ouch.
Rosairo , July 29, 2017 at 2:46 pmis it a love affair? where are the fights about money if sharing finances, and even worries about money that cause pain to the relationship even if not?
Heraclitus , July 29, 2017 at 8:53 amClive,
I don't know if you have already heard of it but look into The Stockdale Paradox if not.Blurtman , July 29, 2017 at 9:05 amIt's ironic that discrimination against both blacks and poor whites was much more overt back in the day. In our Southern cotton mill towns, 'lint head' was a worse deprecation than the n-word (which is not to say that blacks were not at the bottom of the totem pole). Nevertheless, people who grew up working in the cotton mills did, in many cases, move to better lives. They often owned their own homes, and the paternalistic mill owners actually provided recreation facilities, scholarships, and supplemented the pay of local teachers. One woman, who, like many of the workers, came from the mountains to the foothills to work in the mill, said: 'I never saw running water or a toilet until I started working in the mill.'
ambrit , July 29, 2017 at 10:54 amThese types of studies suffer from a certain amount of GIGO. To base the definition of a group upon European colonization is absurd. There are "Hispanics" of all races. Vanna White is Hispanic. In this day of ancestry.com genomic analysis, a credible study should include at least three determinants of race/ethnicity: self-identification, third-party identification and genomic analysis.
tony , July 29, 2017 at 11:31 amRace and ethnicity are good for only so far in modern sociological analyses. Call me what you will but I see "class" as independent of either. Any version of "True Believer" Meritocracy would see this clearly and act accordingly. Of course, there is no such thing as a "true" version of anything. The Meritocracy we suffer under today is just another 'mongrelized' shibboleth.
"Self identification" should also be broken down into "aspirational" self identification and "cold hard desperational" self realization. The "meet me in St Louis" personal future vision serves the same purpose as "Bread and Circuses" did for the Roman Empires' elites. Well, now, the "Bread" part of that scheme is being short-sightedly whittled away by the Powers. No grand conspiracy is needed to do any of this. Plain old greed and incompetence are all that is required for an adequate explanation.Enquiring Mind , July 29, 2017 at 11:44 am'Asian' is even worse. Pakistanis, Japanese and Indonesians have almost nothing in common apart from arbitrary definition of what is a continent.
That being said, neuroticism varies between groups, and it is also a pretty stable variable across a human life. Optimistic people are optimistic in even in adverse circumstances.
WobblyTelomeres , July 29, 2017 at 12:03 pmYour mention of Vanna White made me think about when we will all have to buy a vowel instead of using it for free, soon followed by all those consonants. No doubt, there is someone, somewhere, working on monetization of language. Über could even charge extra for the umlaut. /s
GlassHammer , July 29, 2017 at 10:39 amSome how, some way, Larry Summers will be nosing about when it happens.
Anonim222 , July 29, 2017 at 11:54 am"The technological displacement of low-skilled jobs is here to stay – and is an important issue for many countries, well beyond the US. Addressing this issue will require longer-term changes, such as education and incentives that provide the young in economic desserts the tools to move to where the new jobs are. "
Skill development (education) is not a problem/priority when capital has access to a global workforce and ever cheaper labor. You can keep your production process rudimentary and find a workforce willing to work for a pittance. If you happen to need a worker with skills/education you can select a qualified one from any nation on the planet.
Has it dawned on anyone that "access to the global-workforce" is one of the primary reasons that the U.S. has some of the worst schools in the world but has some of the best universities?
Ned , July 29, 2017 at 11:09 amBest universities. Even that is false now. Your average graduate has a similar level than a high-school student from Asia or Europe. I have taken engineering at university and some mates who when to the US to study as a part of exchange programs said that it was just a joke
It turns out that letting education become another profit center does not produce the best outcomes. But hey no wonder, the leitmotiv of predatory capitalism: the worst possible product at the highest possible price has also been applied to your universities.
Your elites have devastated your country, sold its industrial base, stolen its infraestructures and corroded everything. It's just a matter of time you lose what remains of your global leadership.
SerenityNow , July 29, 2017 at 1:32 pmThe "scenes can only be shot in a large rooms, or sets with no back walls creating false illusions of how wage earners live" comment is incredibly astute. Americans watch thousands of hours of TV and movies and subconsciously must compare their living situation to what's portrayed therein.
Besides all mentioned, I would like to add one more never mentioned item; as a former resident of San Francisco, the most phony and enraging thing is that people in movies and TV always get a parking place in front of their destination.
The reality is that drivers in urban areas waste ten, twenty or more minutes searching for legal parking after a long tiring day at work, are raped financially by parking meters, tickets and street sweeping zones.
Yes, I moved to the suburbs. The availability of unlimited safe parking was like regaining vision that I never knew I missed until I could see again.
Ned , July 29, 2017 at 5:40 pmParking is not a right-it is street space usually owned (and often freely given) by a municipality. That municipalities wish to manage the use of their space property should surprise no one. No one has the "right" to drive a motor vehicle and be able to temporarily store it wherever they want at little or no cost! The real travesty is that we have spent decades creating a built environment where for many, cars are the ONLY way to get around.
It didn't have to be that way. If you lived in a place where you had to pay the actual cost of motor vehicle operation, but we're also able to easily live without one, you'd never worry about parking again.
jrs , July 29, 2017 at 6:24 pmThe Green Planner flashes his lantern of truth to light the way .
IF effective mass transit were available everywhere, your argument would hold more water. You work the only job you can find and transit is not an option. What are you supposed to do? Starve so that some Tesla or Range Rover driver can get the space that you so graciously left for them?Let me carry–what I believe is your point of view!over to other things:
Housing and food is not a right either. If people had to pay the true cost of living in structures and raping the earth to eat, the more enlightened of them would realize that it would be better to commit suicide.SerenityNow , July 29, 2017 at 6:45 pmthe basic problem seems apartments etc. designed without parking spaces, but if they are very old buildings dating back to when the automobile was just coming out then that's the way it was (and of course some of san fran is quite old). Some mid century apartments also seem to have been stupidly designed this way for no particular reason it seems (just stupid).
Yes municipalities should go all in for public transit, and we as citizens should push them too. Build really really good public transit in all major cities (ok it's never going to be a panacea for rural people, but the big cities, it is possible). But individuals make the choices they do in the city spaces we actually have now.
Synoia , July 29, 2017 at 3:45 pmMass transit is not the only alternative to a car-centered built environment–I never called for mass transit anyway. I am instead suggesting we could have built our areas of habitation so that cars are not the most convenient (most heavily subsidized) travel mode. Driving is cheap and convenient because we've made a lot of decisions to keep it that way. And if you don't think it's cheap, you might be missing how expensive it is in other places.
You're right that we don't pay the true cost of a lot of things, and if we did, all aspects of modern life would be much more inconvenient. But the degree to which we subsidize a lifestyle based on automotive accessibility is especially noxious, and disproportionately affects the disenfranchised. Yes, there's not much we can do about it now. But people believing they have a right to store their large machines on public property (for free) for any length of time doesn't help.
rps , July 29, 2017 at 11:12 amTo live in a City – lose the car. That's obvious to me.
Alejandro , July 29, 2017 at 11:19 am"He that lives upon Hope will die fasting." Benjamin Franklin. Poor Richard's Almanac
rps , July 29, 2017 at 11:24 amThe possibilities of what could be are crafted in the imagination, and the wretchedness of 'what-is' can be a powerful source of motivation. However, captured imaginations, the target of TINA, where this crafting is stifled and semiotics are displaced with a preference to conjure the mystical through religiose pious fiction, noble lies, magnificent myths etc., and more recently through pseudo-science with "magi-matical" preciseness, disguising class dogma behind an aura of {irrefutable} scientific 'credibility', has a long history hopium without wherewithal seems the road to frustration for the have-nots, yet the toll-gates always seem occupied by the haves.
Then there's gestation v. microwavable expectations , i.e., sowing and reaping v. reaping without sowing with amazon 2day delivery insidious unilateral power of dependency.
edmondo , July 29, 2017 at 11:39 am"The rugged face of society, checkered with the extremes of affluence and want, proves that some extraordinary violence has been committed upon it, and calls on justice for redress. The great mass of the poor in all countries are become an hereditary race, and it is next to impossible for them to get out of that state of themselves. It ought also to be observed that this mass increases in all countries that are called civilized. More persons fall annually into it than get out of it." Thomas Paine. Agrarian Justice. 1795
WobblyTelomeres , July 29, 2017 at 11:56 amI know that this is an important paper because it has footnotes and if you want someone to take your seriously, you gotta have a lot of footnotes.
For a more mundane view of hope, poverty and despair, you may want to read this guy. Be forewarned, no footnotes.
https://www.thisappalachialife.com/single-post/2017/05/16/Being-Poor-Aint-Cheap
Bobby Gladd , July 29, 2017 at 4:01 pmYves: I wonder about the emphasis on hope
Hope is cheap. Real solutions aren't.
ambrit: No grand conspiracy is needed to do any of this. Plain old greed and incompetence are all that is required for an adequate explanation.
There it is.
fco , July 29, 2017 at 11:57 am"Hope is dope, and dope is hope." – Vietnam war GI saying.
William Neil , July 29, 2017 at 12:36 pmMoving to the US from a "third world country" riddled with graft and corruption, it was amazing to see Americans complain so much when they had it so good. That was 45 years ago.
Now, it looks like the US is turning into the country I came from.
Back home ( and yes, it seems I still think of it as home, go figure) religion and its offer of salvation and hope, not to mention the acceptance of your lot in life, was the opiate of the poor. Here in the US, real opioids are readily accessible to those who have lost hope.
What's interesting is that now the jobs have moved over to my country of origin, the middle class has quite improved, whereas in the US, where people always seemed to have it easy, are now the ones that are in desperation.
Who or what to blame off the top of my head, Americans were prone to think they were the center of the world, that they were number one. We, too, in other countries were made to think that. Complacency kills. So does trust in elected officials who cater to multinational corporations and financial behemoths.
roxan , July 29, 2017 at 1:31 pmHere is a brief but powerful paper on the correlations between "Deaths of Despair" – the ills of rural Red State America – and voting support for Trump, by counties: http://aese.psu.edu/directory/smm67/Election16.pdf
The very strange thing about the American economy today is that a good portion of the top 20% of the income distribution live in the realm of the two "happy" indicators: the low unemployment rate and low inflation, which is not the reality that 60-70% of the nation is feeling, as expressed both in the Sanders campaign and the election of Trump.
In reality, the upper 20% of the nation are living in, still, the "roaring 1990's" of the Clinton Dreams, while many are experiencing 1929-1932 despair, even if the objective conditions are not as horrific.
If the nation could only cross the Rubicon of intervention into Neoliberal Labor Markets, via a WPA and CCC when the whole economy collapsed, it would help meet those needing work half-way but it won't/can't. The Neoliberal rigidity on what government can and can't do in labor markets is the obstacle, intellectual and practical. That helps explain why we can't get to FDR's Second Bill of Rights from 1944 and "the Right to a Job" or MMT's job guarantee program (as advocated by L. Randall Wray) despite so much of the nation's needed work not being addressed: social, structural and environmental.
These tensions have played out inside the Democratic Party. The Clinton's think tank, the Center for American Progress, has played two notes. In December of 2015 they put out a long policy paper touting Apprenticeship Programs to fill the business cry for the "jobs-skills gap," and it was followed by a number of shorter follow-up policy pieces pushing this direction. Then came the "Ideas" Conference of May 16th, 2017, where they proposed a Marshall Plan-WPA inspired targeted jobs guarantee program for a portion of those needed work, those without a college degree. It didn't take, as the conference speeches an panels on that day clearly showed, and this is how I interpret Senator Schumer's "Better Deal" Op-Ed in the New York Times on July 24th. Apprenticeship programs have won out, and industry is happy to have the public pick up as much of the cost as they can manage to shift.
I don't think this meets the need I see presented in today's posting by Carol Graham, or the one I linked to by Professor Shannon Monnat from Penn State. Hardly.
Yves Smith Post author , July 29, 2017 at 1:35 pmI come from one of those desolate towns people talk about so much these days. My mother always said the steel mill was a good company because they didn't pay in scrip, and they built decent houses, paved streets, provided the utilities and so on. Eventually, they even built a community center and library. At Christmas, they put on a parade.
That is all gone. The steel mills and mine are not only closed, the mill has mostly been torn down. When I had to go back to care for my mother in 2004 I was shocked–downtown had always been crowded with traffic. Now, I could have slept in Main Street with no danger of being run over. All the stores were empty, or had turned into 'coffee shops' i.e. gambling dens. Even our dignified old bank building was now a coffee shop! At first I thought the coffee fad had reached us, and remarked on that to a neighbor I saw coming out of one. She laughed and said, "I work in there. We just pour whiskey, that's all. It's one-armed bandits, no fit place for women."
I could not buy the most basic things, such as getting a lock installed and a key made, glass for the windows, lumber, or even cement. The house was falling down but I couldn't buy what I needed. We lived in a nice suburban area, but most of the street was abandoned. Next door, I saw a guy who looked like Cletus (in the Simpsons) building an actual camp fire in the front yard! I was going to ask him to clean up the rat infested garbage pile in the driveway, but decided it was best to avoid him.
No one had work. One relative's teenage boy was loading trucks at night for sub-minimum wage and happy to have that. His mother, Linda, was subsisting on her mother's social security. The old lady had a stroke in middle-age, could not move and screamed constantly. She had to be lifted from bed to chair and diapered. Linda had done that since the 1980s, and now had heart trouble herself. She had no earning skills and was trying to hang onto the house. If she put her mother in a home, they would all have been out in the gutter.
Even as an RN, I could only find a few $10 hr jobs, not enough to live on considering the long commute. I had to go back to the East Coast, and send money home to hire aides. I met a lot of absolutely desperate people. One lady, who offered to help with Mom, was taking care of her uncle and father, who both had dementia. My mother was violent, listened to nothing and was difficult to manage. Aides quit as fast as I hired them but I was trying to hang onto our family home which would be lost if I put her in a nursing home.
I did not see anyone sitting around drunk or stoned, and never saw that when I grew up either. I think all those tales about violent, drunken hillbillies are just that–tall tales. Most of the young people I met were going into the service. I found them to be good steady people who did what I asked and felt bad I couldn't pay them more. They were having a very hard time, as there were no jobs one could drive to whatsoever. It is the same throughout the entire Ohio Valley. A wasteland.
The military seems to provide a decent solution but young people shouldn't have to risk dying in order to get an education. My suggestion would be something like the old CCC. Learning skills is not enough. People need to get away from the whole area and learn how to live in 'the world' as Appalachians refer to the larger society. I had more than one young person come up to me and exclaim, "I heard you was out in the WORLD. What's it like?"
William Neil , July 29, 2017 at 2:13 pmThis is so sad and it must be terribly stressful for you too.
roxan , July 29, 2017 at 7:17 pmThanks Roxan. I live in a county in Western Maryland which is formally part of the legal jurisdiction of the Appalachian Regional Commission, set up by Congress to bring the 13 state area up to "modern" standards of infrastructure, education and I suppose, "the way the rest of us live." I think the funding averages about $13 million per year per state, hardly making a dent; it does offer loans for creative types with business ideas, including some green ones. And I think the Trump Admin. zeroed out the funding, if not out right reached for the organization's abolition, in their current budget proposals.
But you are right, something much more powerful in terms of outreach and structure is necessary. A new CCC and WPA, yes, but much harder to achieve today, and the mission more complex than the originals, which served mainly all young unemployed men. Today it will be multi-racial, gendered and aged I don't know whether it is good to design it for the ARC needs to take the citizens out of the region
I think the structure and cultural imperatives of work, including the psychological benefits, are the way to go rather than the "guaranteed" annual income so fashionable among parts of the left, and even with some Libertarians like Charles Murray.
For most of the work designs I've been thinking of, additional training will be necessary, it's going to take more than a week of orientation, and flexibility will be crucial. I try to keep the idea alive, difficult for the reasons I put forth in first comment above, to be ready with at least some prototype, pioneer examples, to be ready for the next great economic crisis. But, of course, the crisis is already here in this region (and the urban ghettos for how long now half-a-century or more )
William Neil , July 29, 2017 at 9:39 pmPeople need self-respect, and that comes from feeling competent. If you feel you can't do anything worthwhile and never will, pretty soon you don't see any point in living.
Yes, a modern WPA or CCC of some sort, would certainly be different. I doubt there is any funding, too. Has anyone ever had the idea of holding town halls to find out what people in these areas think would work?
As for the Democrats, I remember when Kerry came to campaign in 2004. He went to the town across the river, and hardly got out of his stretch limo. I had planned to go see him, but they locked down both towns, and closed the bridge across the Ohio. I saw him on TV, making a speech to what appeared to be a cheering crowd. Later, I read in the paper they had paid a few old union guys to wave signs. He clearly had no interest in us. I was disgusted, remembering how JFK came to our town and and discovered–guess what? Appalachian poverty!
Clive , July 29, 2017 at 3:48 pmYes roxan, I've been trying to get some momentum going for a CCC in our region because it has a strong environmental ethic, working very hard to successfully ban fracking. Trying for three years now.
I must have done a half-dozen postings at the Daily Kos on the topic, but there is just a blank when it comes to alternative thinking about the economy, except for the decentralizing, self-sufficiency, farm to table greens.
The opposition to Trump met to plan with a good turnout in Cumberland in early February, and there were three or four major directions apparent. But by early April, only the feminist caucus was still going, and they're decidedly not interested in the political economy.
Some of the small green businesses who supplied the leadership for the anti-fracking campaign have struck me as being threatened by a program that might pay $15.00 per hour plus benefits – which a CCC/WPA should do because they are competing for cheap labor as well, and find that threatening. They'll never say that openly, but the local organic farmers rely on a program called WWOOF, which is like a hostel arrangement without wages; the young nomads come and work on the organic farms, learn something, get room and board, but no wages. Here at http://wwoof.net/ Is this whole movement a serious hobby or a new economy in the making? It is troubled by all the ancient problems of small scale agriculture: turning a profit and paying wages without turning the workers into a scorned minority, like the migrants.
I think a green CCC with locally designed projects to help farmers with some of their other traditional problems – manure storage and management, fencing to keep livestock out of streams, and so forth, plus all sorts of needed restoration projects (wetlands, contiguous forests, pulling invasives, fencing large areas and culling deer to restore native vegetation ) which also should be designed for what they plant and where, multiple purposes, to combat global warming, could supply a lot of purpose to countless lives.
I'm continually amazed at the resistance; cultural, economic, ideologically, and sad to say, in too many cases, traditional business opposition to a "better deal" for labor, green causes or not. Plus the great American tradition of stigmatizing those who have served time or had addictions, who need the most help, and need purpose in their lives.
I don't know if we'll get there without a major collapse that forces the issue, forces eveyone to face the truth that the private sector can't meet our human needs as currently constituted.
My Congressman, John Delaney, got a written outline from me in a small meeting with him and just one staffer: he was stony faced about it and has never shown any interest. If you know about his plans for "infrastructure" – the terms on which he proposes to bring all that idle American "capital" home, you'll know why.
I've also done presentations in front of the city of Cumberland's Mayor and Council: it's a city in a county with 5,000 derelict structures: collapsing, abandoned, vacant. Lot's of work to handle them and turn some into affordable housing perfect match some sympathy at the council, but they also looked like I was proposing a mission to Neptune. Can't get more basic about the needs in this situation this is a problem in all the old de-industrialized cities, as well as throughout Red rural America as you so dramatically showed us.
Until I hear better proposals, I don't intend to stop pushing it. I also see this as a way to get some more "democracy" into economics, proposing, planning, refining the work that needs to be done another route that at times seems more logical, and ought to be easier, than democratizing the workplace at Target or Home Depot – or Walmart.
I'm sure that if that national, state and local conservation groups got behind this, they could come up with, easily, enough compelling projects to keep everyone at full employment for decades. I've proposed a few myself. Enough for now.
Sue , July 29, 2017 at 2:07 pmIf nothing else, your comment gives me hope that there's still such a thing as human decency ! which you exhibit.
My grandmother lived to be 101 years old and, unlike your mother, enjoyed good health or, perhaps better put not bad health considering her great age. She still lived in the town she was born in and was one of those sorts who never left where they grew up. But my father, even in the late 1970's, read the writing on the wall and moved us around (even becoming expats) before settling in the south / south east (of England).
It's a little shameful ! but honest ! to say that I loathed visits. I made excuses and did the minimum I could get away with. My Dad was the same. Although my grandmother enjoyed the last vestiges of the social safety net we still cling on to here (local county provided sheltered accommodation which had a warden and was fully accessible for someone who might not be that mobile, social workers visiting every couple of weeks, visiting nurses, a doctor who did house calls and care workers twice a day to help with personal care and nutrition) and we didn't need to concern ourselves with that side of her situation, when we visited, we felt like fish out of water.
The metropolitan sophistication and, yes, affluence, of London and the southeast made the grimness, poverty and ingrained loss of hope (there's that word again) depressing to be around. Our self awareness of our newfound snobby elitism made our discomfort even worse. It was no use, or at least not honest and too much cognitive dissonance, to try to pretend that we didn't find the small town mentality hard to take.
But then living with either no, or only poor quality jobs at minimum wage (the town is an subscale inland port, literally the last place you come to at the end of the freeway and after that it is more-or-less you fall into the North Sea) ! well, escaping is nigh on impossible with our dismally low social mobility. And the town can forget about government funded regeneration or benefitting from an industrial policy.
The short version was (both my dad and I tacitly and unspokenly concluded) that it was easier ! for us, being selfish ! to stay away. So I can fully understand the selflessness and sense of duty you've shown. It makes you a better person than I am.
Of course, none of us should have to make these unpalatable choices. There shouldn't be anywhere in our countries where we feel simultaneously alienat ed and alienat ing .
Synoia , July 29, 2017 at 3:40 pmRoxan,
I like how you write. This is a very despairing present and outlook
"Most of the young people I met were going into the service..The military seems to provide a decent solution but young people shouldn't have to risk dying in order to get an education"
A solution from no other choice. Some of the youngsters will understandably make a virtue out of necessity & claim patriotic duty as their calling. The avenues to patriotism & what patriotism is for every patriot are various. Patriotism is another big word.Sue , July 29, 2017 at 4:00 pmThe military seems to provide a decent solution but young people shouldn't have to risk dying in order to get an education
Join the Air Force. Only Officers get shot at.
Eureka Springs , July 29, 2017 at 8:16 pmGood suggestion. How many positions are open in the joystick and gps drone division?
makedoanmend , July 29, 2017 at 6:51 pmNor should people should have to murder to get an education.
Sound of the Suburbs , July 29, 2017 at 2:10 pmStrumpet City (both a book and TV series) is a story about how the working class of Dublin, Ireland go on strike for better pay and working conditions. The strike is broken and the Irish story hero is last seen in a British military uniform sailing away from his home and wife to fight for a foreign government in some foreign land. (Although fictionalised, this story is a dramatisation of actual historical events.)
The story was set at the turn of new 20th century. I suppose not all that much has changed at the turn of the new 21st century.
The monied want more and then the poor by necessity set off to fight the impoverished of foreign lands in the name of
Cat Burglar , July 29, 2017 at 5:53 pmWhere did it all go wrong?
The populists, Trump and Brexit are all symptoms of the same underlying problem.
Neo-liberalism was seen as a one size fits all model for the world.
When the neo-liberal model worked everyone was fairly happy with it before 2008.
Then it stopped working and no one seems to know how to get it working like it used to before.
The underlying economics, neoclassical economics, doesn't look at private debt in the economy and so no one was really aware the whole thing was running on easy credit.
The US economists that developed these ideas were missing certain critical information.
Monetary theory has been regressing for one hundred years:
"A lost century in economics: Three theories of banking and the conclusive evidence" Richard A. Werner
http://www.sciencedirect.com/science/article/pii/S1057521915001477It has never been accurate in their life times and has only ever known by a few.
Milton Freidman started with "fractional reserve theory" and then moved to "financial intermediation theory". His early monetarism didn't work because the "fractional reserve theory" was flawed. "Financial intermediation theory" is even worse but its problems remained hidden until 2008.
The US history of capitalism missed problems in the Old World.
The US was a new country where lots of land remained unclaimed. In the Old World the landed Aristocracy were constantly pushing up wage costs with their rentier ways. The rents of the Aristocracy had to be paid by business in wages reducing their profits.
The Classical Economists of the 19th Century were only too aware of the two sides of capitalism, the productive side where wealth creation takes place and the parasitic side where wealth extraction takes place.
It all disappears in very early neoclassical economics.
The distinction between "earned" income (wealth creation) and "unearned" income (wealth extraction) disappears and the once separate areas of "capital" and "land" are conflated.
The problems with rentier activity in the economy are hidden in economics.
These things disappeared so long ago everyone forgot about them, but a free trade world required a low cost of living to pay internationally competitive wages.
The repeal of the Corn Laws to usher in the era of Laissez-Faire.
The landed aristocracy wanted high corn prices to get more land rent.
The businessmen wanted lower corn prices, to lower the cost of living, for lower, internationally competitive wages.
The conflict between rentier and business interests with free trade.
jerry , July 29, 2017 at 5:55 pmI flag the idea "economic desserts [sic}" in the second to last paragraph. A region with no work, nowhere to buy or sell anything, and no assets of significant value? I wonder how you could map it, and how much of the area of the nation would fall into that category.
I've worked in one, a Central Oregon county that almost had to close its road department because of the lack of tax revenue. Tree cutting and mill work disappeared decades ago. Ranching is the core of the economy, but that is less labor-intensive than ever, and dealers of equipment and materials are all in other counties. Starting a family ranch is impossible if you're not already a multimillionaire. For many years the tiny Chevrolet dealer was the largest employer in the county.
Economic desert is an apt descriptor for places like that. The kids have been leaving for generations already ! the author of the article suggests education and training programs that will make it easier for them to leave. No other suggestion. No ideas for regional economic development, for example.
ckimball , July 29, 2017 at 6:19 pmSpeaking of lack of hope, it occurs to me that the only way a Bernie/progressive agenda would possibly be adopted by the DNC is if the republicans were doing ok or good from a legislative and presidential standpoint, because then this puts the pressure on the Dems to put forth something that works and change their ways if they want to win back power.
However, since we are witnessing a truly impressive trainwreck and lack of competence on the part of the right, both within the house adopting legislation and within the presidency itself that is doing god knows what on any given day, all the Dems have to do is sit back and watch, and wait for their turn at the booth. As there are only two options in this wonderful system of ours, the American citizens have nowhere else to go come 2018 and 2020.. the slogan "at least we're not them" will be enough – with some "progressive" tidbits thrown in for good measure a la Schumers' latest proposal.
Geophrian , July 29, 2017 at 7:54 pmI had to make myself read this. My mind diverted to word hope and what makes it become an experience. Just to add a little to it.
I resented Obama for selling hope while he was doing it. It seemed a manufactured hope as opposed
to organic hope (such as hope arises in response to something that occurs that does not seem possible).I believe that for most black people the existence of Barack Obama's candidacy and then his victory generated a huge quota of hope. It was palpable to many of us and elicited some unsolicited hope in us too.
I believe this emotional state trumped and trumps the reasons listed in this article. The above was
transformative and perhaps many black people may feel more entitled to express their anger now.
Another example of hope arising from something that occurred that does not seem possible in the short term is same sex marriage. Both of these segments of our population have been injected with hope
unlike the "poor" category which have been inflicted both emotionally and physically with loss and
disillusionment. The erosion of the public domain is an attack on the ideals and property of the working people of this country.c_heale , July 29, 2017 at 7:59 pmFor what it's worth, here was my attempt at making a movie about the reality of life in America:
DSP , July 29, 2017 at 9:50 pm"Poor blacks are also half as likely to experience stress – a significant marker of ill-being – on a daily basis as are poor whites, while poor Hispanics are about two-thirds as likely."
I'm not sure this piece of research is correct. I haven't checked the reference, but I'm sure I read another piece of research a while back that said that suffering from racism causes a great deal of stress and psychological problems. The whole article appears to be a lot of waffle in my opinion. For example how can you possibly define hope. I once read that if you read a piece of research and you can't think of a way that an experiment can be done to show the results, then the research is invalid. I can't think of any experiment that can measure such an abstract concept as hope (the concept of hope is far more abstract than anger, for example).
For some reason I can no longer reply to the relevant comment.This is an addition to "jane @ 7-03".
One of the most interesting things that has happened over my lifetime has been the almost complete disappearance of the past for the younger and the modern age.The element that I'm referring to is older proverbs and aphorisms,in this case "Hope makes a good breakfast but a poor supper".
I've also been told that each of the "Friends" would have to be earning $130,000 each to live their lifestyle and they wouldn't be loafing about on the sofa doing it.
Does anybody in America earn 130K rather than more or less?
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Jul 28, 2017 | mihsislander.org
Peter AU 1 | Jul 27, 2017 1:48:23 AM | 92
ProPeace@84 - "Well, not if the ships carrying those tomahawks are hit by Yakhonts first"
I agree, but you're assuming a US Navy ship in the Persian Gulf would be launching the Tomahawks. Block IV TLAMs have a range of between 1300 and 1800 km depending on the model. They could be launched at Iran from the Mediterranean, Red Sea or Arabian Sea - well outside the 300 km range of an anti-ship Yakhont, Onyx or BrahMos. I'm guessing the US Navy would take that into consideration when they attack Iran.
"...And the Russians have also electronic countermeasures that caused that two US missiles fired from the Western Med area towards Damascus to fall into the sea back in 2013, I believe. No problem to protect Iran in the same way..."
Russia will be angry, but it will not start WW III with the US over Iran. They won't have to. An attack on Iran will push China over the edge and THEY will be perfectly willing to start WW III with the US in retaliation. Nobody talks much about that, but Iran is China's red line. They will jump in as soon as we attack Iran, guaranteed. They know they're very close to the top of the US Imaginary Enemies list and they'll be next.
Russia will voice its objections to the US/Israeli/GCC/NATO actions and indicate support for Iran and China, but won't jump in at the start. They will just say that they are perfectly willing to do so. The US will back down because we can't win either a conventional or nuclear war with China and Russia at the same time. NATO will fold because their capitals are maybe six minutes from Russia's RS-26 ICBMs. The Germans and French will not die for US hegemony schemes if it comes to that. The Brits might because they're kind of nuts about Russia - toss up, I guess.
Sadly, despite the consequences, the US will invent an excuse to attack Iran and do so. This short interview in June with James Mattis, our Defense Secretary, illustrates why. The interview was conducted in response to a request from a student (Teddy) at some random high school newspaper in Washington state. Mattis responded on a whim and talked with them for a while, taking questions. The interesting thing about this interview (to me) was that Mattis actually sounds like a pretty rational person in the first half of the interview, especially in regards to Russia. Then Iran and Syria comes up and he just goes off the rails. Poor Teddy...
Full transcript: Defense Secretary James Mattis' interview with The Islander
PavewayIV | Jul 27, 2017 1:26:55 AM | 91
Close in defences at target sites seem the best defence against cruise missile attack - Pantsir type of thing. Short range missiles and cannon. Any idea what Iran has in the way of short range defence systems? Iran seems good on the electronics side of things which is what modern war is all about.
somebody | Jul 27, 2017 2:12:47 AM | 93 #91 PW4
Thanks for that interview, Mattis is quite clear: they will keep trying regime change, nothing else. Russia is a competitor not an enemy and they are 'deconflicting'.
His optimism that the American Way is the solution is quite funny.
Quadriad | Jul 27, 2017 5:38:48 AM | 96
I can't believe that someone as astute as you are is now spilling this defeatist garbage. Tomahawks are retard-missiles, flown in straight lines at low altitudes and at low speeds too. S-200 of any vintage is an utter overkill for the Tomahawks.
Pantsirs, Buks and Tors are borderline overkill.
All that's really needed is a good Igla or Two and well alert crew. The Serbs were murdering Toms like flies back in 1999 using the Vietnam-War era vintage SA-7s. Or a good old Shilka and the radar turned on.
Quadriad | Jul 27, 2017 5:40:56 AM | 97
straight lines - near straight lines, they do turn when they need to dodge a mountain or similar. Otherwise, not as much.
Or kill the GPS satellite and all the Tomahawks become as useless as c*** flavor lollipops. These worthless Raytheon pieces of shite probably don't even have an inertial mode.
Thank you Paveway and others for your responses on the Iran military capabilities issue.
Nuff Sed | Jul 27, 2017 6:55:19 AM | 98
I disagree that Iran is either China's or Russia's red line. Logically she should be, but she isn't. What I think has kept Uncle Scam from attacking Iran is Iran's own military strength. That is not to say that Iran is in the same league; but because the US and world economy is so vulnerable to a sustained spike in the price of oil, the US cannot afford to mess with a country that has the power to wreck havoc on the price of this strategic commodity.
A single Sunburn or Nour missile direct hit at Saudi Arabia's only deep water port at Ra's Tanura is enough to put all Saudi oil exports out of commission for several months.
Given the derivatives volume, the margin calls on these might well push the Dow and S&P over the precipice and precipitate a major crash.
And then there is this:
http://www.rense.com/general59/thesunburniransawesome.htm
During Bush the Younger's tenure, Cheney, Rummy and Wolfowitz were dying to attack Iran, but cooler minds among the military brass prevailed and didn't let the children play at their war games. But that was then. It seems with the Neocon purges at the Pentagon and State since then, the Kool-aid has made it all the way to the top, so that reason is no longer the decisive factor in the decision making process.
And finally, methinks the implications of the mass production of the indiginized S-200 is that it will not be too long (5 to 10 years?) before Ben Gurion Airport is de facto declared a no fly zone, precipitating a significant wave of reverse migration back to New York and Florida and Europe from occupid Palestine.
Nuff Said.
OJS | Jul 27, 2017 7:02:54 AM | 99
@denk 95
Nope! I'm not an Indian nor China apologist but primarily to show a new war brewing between India and China and both with Russian S-400. Russia just recently signed agreement to sell S-400 to India. You should watch this vid first (three parts)
https://www.youtube.com/watch?v=udADHfiDR80
Here another viewpoints from Pepe Escobar
China and India torn between silk roads and cocked guns (OpEdNews Op Eds 7/26/2017 at 19:32:31 )
V. Arnold | Jul 27, 2017 7:04:23 AM | 100
PavewayIV | Jul 27, 2017 11:20:35 AM | 108Well, I certainly look forward to PW-IV's reply. I agree with you to the extent that the U.S. is highly overrated on most weapon systems.
Syria is the first time since Vietnam the U.S. has faced an equal or possibly superior (technologically) opponent. We'll most certainly see...
OJS@81 - Re: India/China - Interesting in its own right. But ever since the U.S. MSM started weighing in with their spin, I had to tune out. I'm under constant assault by full-spectrum MSM insanity in the Middle East at the moment, and nobody cares about what the U.S. thinks about a Indian-Chinese border dispute.
Peter AU 1@92 Re: Iran short-range point defense - They have a couple of dozen old TOR-M1s and BUK clones, but nothing like Pantsirs. Since their overall network is not terribly integrated (as far as anyone knows), the older short-range equipment is of limited value. Iran relies on a kind of long-range point defense strategy along with a long-range border ring.
somebody@93 - Re Mattis "...His optimism that the American Way is the solution is quite funny." His heart is in the right place. I would simply prefer him in his old job as Commandant of the U.S. Marine Corps, rather than U.S. Secretary of Defense.
Quadriad@96 - "...I can't believe that someone as astute as you are is now spilling this defeatist garbage..." The war with Iran will not be decided by simple weapon superiority (or lack thereof). Iran will lose its entire air defenses in the first two weeks of an all-our war, and the U.S. will bail out before either side 'wins'.
Nuff Sed@98 - The U.S. spends $600 billion a year on the military and imports less than 12% of our oil from the Persian Gulf. Since when has the U.S. ever cared about the sacrifices of the 'little people' when pursuing its imperialistic goals? Do you think big oil interests in Washington would cry much about $200/bbl oil?
"...During Bush the Younger's tenure, Cheney, Rummy and Wolfowitz were dying to attack Iran, but cooler minds among the military brass prevailed and didn't let the children play at their war games..."
Well, we'll have to disagree on that on. The U.S. war on Iran started a couple of decades ago - we just haven't made it to Iran itself yet. I think the 'loose ends' are just about all tied up by now.
V. Arnold@100 - Our vast technical superiority in weapons has proved worthless in the longest war in U.S. history: Afghanistan. We're very good at blowing things up, that's it. If the war is about anything else, then we're usually in trouble.
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"The American economy has been mangled by decades of assault on capitalist prosperity... Our overall economy has now reached a point of peak debt. The peak bull has now arrived and it is utterly unsafe to be in the casino."
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Jul 21, 2017 | www.nakedcapitalism.com
T Sabri Öncü is an economist based in Istanbul, Turkey. This article first appeared in the Indian journal Economic & Political Weekly .
Total global debt has increased, growth has been slowing down since the onset of the global financial crisis in 2007 and has been rapidly decelerating after 2012. This may be a sign that the world has arrived at its debt carrying capacity or has even crossed it, meaning that capitalism is probably already insolvent.
With my June 2015 HT Parekh Finance Column article titled "When Will the Next Financial Crisis Start?" (Öncü 2015a) I initiated an investigation of the possibility of a new phase in the ongoing global financial crisis (GFC) that started in the summer of 2007. This article was retitled at the Policy Research in Macroeconomics website as "What Straw Will Break the Finance Sector's Back?" when it was republished three days later (Öncü 2015b).
The next two articles in the series were my February 2016 article titled "Has the Crash of the Global Financial Markets Begun?" (Öncü 2016a) and November 2016 article titled "It's the Private Debt, Stupid!" (Öncü 2016c).
The current article is the fourth in the series and its title is inspired by the latest first quarter (Q1) report of the Institute of International Finance (IIF), a respected tracker of global leverage statistics.
Time will tell whether this article will be the last in the series or not as financial markets have a way to put even the best forecasters to shame.
Total Global Debt
In this Q1 report, the IIF documented that the total global debt hit a new all-time high of $217 trillion or about 327% of the global economic output, that is, world gross domestic product (GDP). This is an alarming total debt to GDP ratio.
Furthermore, the report also indicated that while the financial sector debt issuance!although supplanted by money created by major central banks!has moderated in recent years, the total global debt of the non-financial sector has continued to grow and hit an all-time high of $160 trillion or about 242% of the world GDP as of the Q1 of 2017.
Recall that when the total global non-financial sector debt reached $152 trillion or about 225% of the world GDP at end of 2015, the International Monetary Fund (IMF) issued a stark warning to the world that the sheer size of the non-financial sector debt!comprising the general government, non-financial firms and households!could set the stage for an unprecedented private deleveraging process that could thwart the fragile economic recovery of the world, indicating the difficulty of resolving the "private debt overhang" problem in the current global environment of low nominal output growth. (Öncü 2016c)
Table 1 gives a summary of the total global debt at five-year intervals between 2002 and 2017, and shows that this ratio did not become alarming just in theQ1 of 2017. It has been alarming for at least a decade.
Table 1. Total Global Debt (Q1 of Each Year)
Year As Percentage of World GDP Amount in Trillion Dollars Percent Change over 5 Years 2002 246% $86 – 2007 276% $149 73.3% 2012 305% $205 27.3% 2017 327% $217 5.8% Is Capitalism Insolvent?
The IIF said in this report that rising debt "may create headwinds for long-term growth and eventually pose risks for financial stability."
It is puzzling that the IIF is saying this only now. Is this not what has been happening since the onset of the GFC in the summer of 2007? Has global economic growth not been dismal since 2007 to this day or is a 10-year period not long-term enough?
Have we not experienced at least two major phases of the GFC, one originated in the United States (US) mortgage market in 2007 and then spread to the rest of the world, the other originated in Greece in 2010 and then spread through Europe with spillover effects in the rest of the world?
Table 1 also shows that although the total global debt has increased in the period steadily, growth has been slowing down since the onset of the GFC in 2007 and has been rapidly decelerating after 2012. This may be a sign that the world has arrived at its debt carrying capacity or even crossed it, meaning that capitalism is insolvent already.
And, if this is the case, then a global deleveraging accompanied by increasing delinquencies and defaults will accelerate. Indeed, delinquencies and defaults have been accelerating around the globe in recent years. As Indians and Italians know quite well, their banks are already suffering from bad loans severely, and India and Italy are not the only two countries where this is happening.
Developing Country Debt
According to the earlier mentioned IIF report, while advanced economies continued to deleverage and reduced their total debt by over $2 trillion in the past year, developing countries increased their total debt by $3 trillion, bringing their total debt stock to $56 trillion. This is equivalent to 218% of their combined GDP, five percentage points above that percentage in the Q1 of 2016.
China alone borrowed $2 trillion of this $3 trillion and brought her total debt stock to $33 trillion with the country's total debt to GDP now surpassing 300%. More importantly, slightly more than two-thirds of China's total debt owed by her non-financial private sector, and her non-financial corporate sector owed slightly more than 75% of this non-financial private sector debt, with the rest belonging to households.
Furthermore, the IIF reported that the emerging market countries increased their hard currency-denominated debt by $200 billion in the past year and, despite the recent dollar strength, 70% of this has been in dollars. The total hard-currency denominated debt of the emerging market countries was slightly above $6.5 trillion at the end of 2016.
The IIF also reported that emerging markets had over $1.9 trillion of bonds and loans falling due before the end of 2018 with the biggest redemptions to be made by China, Russia, Korea and Turkey, and added that the rollover risk was high.
Meanwhile the Equities
Recall from my February 2016 article (Öncü 2016a) that Bloomberg data showed that the world equity markets made their highest peak at $73.1 trillion on 14 June 2015 and from there gradually crashed to $58.7 trillion by 31 January 2016.1 Bloomberg data show that global stocks had continued to struggle until 23 June 2016!that is, until Brexit (Öncü 2016b)!after which they started to recover.
The recovery gained speed about a month after the election of Donald Trump as the President of the US and has been impressive after his inauguration on 20 January 2017. The world equity markets gained $4.8 trillion in the Q1 of 2017!the largest quarterly gain since 2012!and closed the quarter at $71.6 trillion.
Although the performance of the advanced economy equity markets had walked in tandem with the global equities (as expected since they dominate the global equity markets), the performance of the emerging market economy equity markets has been phenomenal. Since the turn of the year, emerging market economy equity markets have outperformed advanced economy equity markets by at least 5%, returning more than 15% in the first half of 2017.
Given the dire signs of a fast-approaching global recession and possibly the third phase of the GFC, offering an explanation for why any of these have happened is beyond me. I will not claim that the third phase of the GFC or a global recession will start shortly, but I would not mind taking credit if one of them happens.
And, if one of them happens, the other will follow.
Let this be my prophecy.
Janet Yellen's Prophecy
In comments at the British Academy in London on 27 June 2017, US Federal Reserve Chair Janet Yellen prophesied that the US financial system was much safer and sounder, and that a crisis like the one in 2008 was unlikely "in our lifetime."
She prophesied this only 19 days after the House of Representatives of the US passed the Financial Creating Hope and Opportunity for Investors, Consumers and Entrepreneurs (CHOICE) Act. If this act becomes law, it will replace much of the Dodd–Frank Act passed by the Obama administration in 2010 as a response to the GFC. Despite the questionable success of the Dodd–Frank Act, the CHOICE Act will remove most of the safety valves the Dodd–Frank Act attempted to put in place.
Furthermore, Yellen prophesied this only about a week before the Office of the Comptroller of the Currency of the US published its Q1 of 2017 derivatives report. This report showed that the top-25 US holding companies with derivatives had a total derivatives exposure of $242.2 trillion whereas the said amount was $160.2 trillion one quarter before the start of the GFC in 2007 and $194.3 trillion one quarter before the Lehman collapse which made the crisis global in 2008.
Since no one debates the crucial role the derivatives played at the onset of the GFC, I can safely say that the situation is worse than it was in either 2007 or 2008.
There are a multitude of other troubles from around the globe that I cannot list because of the shortage of space, but let me respond to Yellen's prophecy as follows:
Debts that cannot be paid will not be.
Note
1 Bloomberg World Exchange Market Capitalisation in US dollars!WCAUWRLD!Index, weekly data.
References
Öncü, T Sabri (2015a): "When Will the Next Financial Crisis Start?" Economic & Political Weekly, Vol 50, No 24, pp 10–11.
(2015b): "What Straw Will Break the Finance Sector's Back?" Policy Research in Macroeconomics, 16 June, http://www.primeeconomics.org/articles/when-will-the-next-financial-crisis-start-what-straw-will-break-the-finance-sectors-back.
(2016a): "Has the Crash of the Global Financial Markets Begun?" Economic & Political Weekly, Vol 51, No 7, pp 10–11.
(2016b): "Is Brexit Moment a Lehman Moment? Fear Factor in Financial Crises," Economic & Political Weekly, Vol 51, No 29, pp 10–11.
(2016c): "It's the Private Debt, Stupid!" Economic & Political Weekly, Vol 51, No 46, 12 November, pp 10–11.
Disturbed Voter , July 21, 2017 at 5:55 am
Watt4Bob , July 21, 2017 at 7:26 amFiat money insures liquidity, as long as there is confidence in it. That is why a confidence game is required to institute or to maintain it.
National debts can be renegotiated at will by State action or markets. The problem is if you are a debtor not a creditor. Also differential balance sheet relative to other similarly situated people (are you homeless?). Creditors and inequality are the threats to debtors and resource poor people. And sometimes liquidity crises. Private debt renegotiation (lower interest, forgiveness of part of the debt, asset seizure of debtor property) is particularly painful because neither party can print fiat money at will unless you are a major bank with an unlimited credit line to the people who can print fiat money at will.
HotFlash , July 21, 2017 at 5:47 pmOr, at what point do you quit calling it a ' bubble ', and start calling it an ' aneurysm '?
Cranial-anal insertion assumes infinite elasticity.
jabawocky , July 21, 2017 at 7:47 amOr, at what point do you quit calling it a 'bubble', and start calling it an 'aneurysm'?
Bob, great line, I am stealing it.
diptherio , July 21, 2017 at 8:12 amI have to say I'm curious about a number of assumptions in this piece. Firstly, that high debt is intrinsically bad. The question is precisely why it is bad? The context being that if all money is created by debt, debt is therefore a simple measure of money supply. Is it because high volume of debt implies risky lending? Or is high volume of low risk debt an issue? Or is high debt a proxy measure (symptom) for other malaises? Increasing debt relative to GDP can only imply increasing global savings relative to GDP. Risk occurs when transfer rates from savers to debtors is low. In this case debt volume relative to GDP could be a simple correlate of inequality for instance.
The second question that came to mind was about the importance of credit write-offs in the global money supply. In a write-off banks lose an asset, and somebody loses a liability. However, the asset isn't lost because the money created by that loan is somewhere. Thus each write-off creates debt-free money (or possibly that liability is transferred to central bank). Over time this should increase in the economy. Thus it is possible that write-offs have systemic importance, and are not something policy makers should try and avoid.
Can capitalism be insolvent? The real question is does it matter if capitalism is insolvent?
ger , July 21, 2017 at 8:21 amIncreasing debt relative to GDP can only imply increasing global savings relative to GDP.
Only if you believe that banks simply act as intermediaries between savers and borrowers. That notion has been thoroughly debunked.
Kevin Carhart , July 21, 2017 at 8:48 pmYeah, I've been rolling in some of that 'lost' money since 2008. Sadly, I missed a chanced to roll in some of the $15,000,000,000,000 or so free money laundered by the Fed. So you say just send the debt back to the Fed and call it even!
washunate , July 21, 2017 at 8:15 amI think you have taken several interesting angles that I only partially understand, so I may not quite be addressing your question on the same order of magnitude on which you're asking it, but I think high debt is intrinsically bad because like soylent green, it's people. Right? All of the structural-adjustment stories were based on debt. I think we're more talking about private debt in this article (and the classic SA examples are against nations), but isn't there a principle that is also applicable to private entities, where being in debt and being given an ultimatum by creditors, that entity is in a compromised position relative to what the creditor wants? Anyone or any entity could be subject at least to an attempt at an "offer you can't refuse", where you engage in the household-sized or business-sized equivalent of structural adjustments, in return for forebearance. I'm partially getting this from Julie MacLeavy's article on neoliberal unemployment-payments programs that require essentially person-sized structural adjustments in return for assistance. (UI payments are not the same as a debt, but I'm taking it as something that is seen as similar by the designers of the programs. Either way you are probably not much of a shopper.) So a high volume of debt is intrinsically bad because it's a high volume of smaller stories and scenarios based around a power relation where the creditor gets to exhort you to engage in SA, and the priority system of SA is intrinsically bad in my opinion.
RenoDino , July 21, 2017 at 4:52 pmWhat does the author mean by capitalism? Capitalism isn't insolvent. Rather, it has been replaced by fascism – the authoritarian partnership of government control freaks and private sector control freaks. It's not complicated at a conceptual level. We run a global empire.
RenoDino , July 21, 2017 at 8:17 amCapitalism was insolvent when the S&P hit 666. It's enough to make a believer out of me. From that day forward, fascism, as you noted, became the world's dominate economic/political structure.
readerOfTeaLeaves , July 21, 2017 at 11:55 amThis is the real playground of MMT. Not the one that creates social programs, builds infrastructure, or hires millions of displaced workers, but the one that prints money to buy government and corporate debt and equities to sustain a boom in financialization at the expense of everything else to maintain an aura of prosperity and facilitate the transfer of the wealth from the middle class to the One Percent.
This is Supply Side Financialization, shoving money out the door to those who already have billions to hopefully create demand on the lower end of the scale using the famed Laffer Curve trickle down method.
The author is both puzzle and horrified by the actions of central banks and governments since the GFC.
They have demonstrated a willingness to do whatever is necessary to backstop and protect the rich.
Even massive defaults don't have the same impact as before since all of these bad loans will be rolled over, written down, repackaged and ultimately bought by Central Banks who will let them roll off their balance sheets forever. China and Europe are leading the way in this endeavor and rest of the world is following right behind.Given the full, massive scope of this intervention, no one can predict how and when it will end.
Nothing like it has ever been attempted before in the history of world finance. Everyone knows there is something terribly wrong with this picture. In the words of Talleyrand, "It was worse than a crime, it was a mistake."EricT , July 21, 2017 at 12:31 pmThey have demonstrated a willingness to do whatever is necessary to backstop and protect the rich.
1. They cannot do that indefinitely.
2. They cannot do that in a world where stock buybacks have basically been cannibalizing corporate wealth for over a decade, and that corporate wealth was built on ! in part ! mergers and aquisitions. IOW, all financialization and very constrained R&D.This economic model leads to a dead end of social upheaval, despair, illness, and pervasive corruption: a mafia world enforced by laws, legislative stupidity, and judges indoctrinated into believing that the source of wealth is 'investment'.
FWIW, it's nice to see such a different perspective, originating from a source that I would not ordinarily read.
Thanks, NC.Steve , July 21, 2017 at 8:40 amJust until the pension money runs out.
perpetualWAR , July 21, 2017 at 10:12 amI'm pretty sure that I have read many times that just the global derivatives exposure exceeded 1.1 quadrillion dollars back in 2011 far exceeding 217 trillion.
Alex , July 21, 2017 at 10:10 am1.5 quadrillion reported in 2015.
But who's counting?
JEHR , July 21, 2017 at 1:24 pmThe rent extracting classes will likely still be ok even if there is a crash – they take money from the churn and uncertainty, not from creating real social value. More movement in "markets" just equals a higher pace of skimming.
Steven Greenberg , July 21, 2017 at 1:30 pmSo finance has embarked on a global experiment where all the financial entities will eventually get bailed-out, bailed-in and recompensed from the 99%'s limited resources. At least that is what has happened so far and why should it change? So unfair!
MyLessThanPrimeBeef , July 21, 2017 at 2:18 pmChina borrowed $2 trillion? While holding $300 billion of US treasuries? Maybe China holds even more.
U.S. Debt to China: How Much Does It Own?
https://www.thebalance.com/u-s-debt-to-china-how-much-does-it-own-3306355===== quote =====
China holds less than the $1.111 trillion held by Japan. Both countries have reduced their holdings in the past year, but China has reduced it faster.China held $1.3 trillion in U.S. debt in November 2013.
===== /quote ====Should we worry that China borrowed $2 trillion when it holds so much US debt already? How much of that China debt is in its own currency? MMT appplies to China just as it does to the US.
Sound of the Suburbs , July 21, 2017 at 1:59 pmDebt in own currency.
The one mistake I made early on was to ignore the liquidity aspect of debt.
Maybe I could have had the money in the US currency the next day or the next month, but when the debt service payment was late, I risked defaulting.
MyLessThanPrimeBeef , July 21, 2017 at 2:26 pmSomething got lost in the neo-liberal era.
We are missing that critical distinction between "productive" investment and "unproductive" investment when it comes to bank credit.
Productive investment goes into business and industry; it generates the money to make the repayments and gives a good return in GDP.
Unproductive investment goes into real estate and financial speculation; it doesn't generate the money to make the repayments and gives a poor return in GDP.
The UK used to know what it was doing until it went neo-liberal with Thatcher:
The bank credit pours into real estate and financial speculation.
The US has never really had a clue:
1929 and 2008 stick out like sore thumbs; bank credit going into financial speculation and stocks (1929) or real estate (2008).
Leveraged financial speculation with bank credit.
MyLessThanPrimeBeef , July 21, 2017 at 2:26 pmDebts that can not be paid will still be paid.
When we are talking about monetary sovereigns or just sovereigns. Look at the Russian peasants – they couldn't pay Czarist regime era borrowings (to decorate the Winter Palace perhaps0, but they still had to paid, over 100 years if necessary.
For other countries, they might have to sell their ports, for example.
As long as there is one taxpayer left, debts will be paid one way or another (sell your body or national parks).
It's unlikely China would forgive US Treasuries if their money becomes the new hegemon currency.
John , July 21, 2017 at 8:41 pmDebts that can not be paid will still be paid.
When we are talking about monetary sovereigns or just sovereigns. Look at the Russian peasants – they couldn't pay Czarist regime era borrowings (to decorate the Winter Palace perhaps0, but they still had to paid, over 100 years if necessary.
For other countries, they might have to sell their ports, for example.
As long as there is one taxpayer left, debts will be paid one way or another (sell your body or national parks).
It's unlikely China would forgive US Treasuries if their money becomes the new hegemon currency.
Scott , July 22, 2017 at 2:23 amYeah, but don't forget: A debt that can be rolled-over is really an asset. Invest (party) appropriately!
Yves Smith , July 22, 2017 at 3:08 amIs all of the US strength now simply raw hard power & is Russia the enemy because it will use other currencies to trade in oil with?
If you don't have the bomb & plan to use your own Central Bank as was the case in Libya, you will be destroyed and executed by a sadist. I mean Gaddaffi. In Iraq it was Hussain, who was hung.Bankers out to get all the money, and all the deeds of the Greeks were threatened with having the tourist friendly ATMs cut off, and their pensioners in need of regular medications were not going to get their drugs. Cyber war is about controlling the assets of your adversary from afar, by remote control.
The US Intelligence services were so intent on spying on their own citizens they made it more possible for their military not to matter.
Everyday that Trump's administration is in charge, there is acceleration of everything that was set in place to go wrong, becoming a more likely reality.Can the US win a cyberwar? Has the US won any of the wars it has undertaken since the end of WWII?
The GOP/C.S.A. has told its people it is poor when it was at the height of economic power capable of declaring economic war on anyone.
What is happening now is that power has been truly wasted, and the lies told about the economic state of the US will become a truth because of how the infinite currency has been spent.It has been spent on only wars that it can't win, but also on war systems that don't work, and worst of all, collecting data that is useless & simply creating a system that works to make the US weak and vulnerable.
Synoia , July 22, 2017 at 12:48 pmI don't buy that currencies have anything to do with US aggression. Way too many countries want to run trade surpluses. The US is the only economy willing to accommodate them by running consistent trade deficits, ie, exporting demand and jobs. That means all those surplus countries must take US$.
Until that changes, and I see no indication whatsoever that anyone has any interest in becoming the big trade deficit country (China would love the status of reserve currency but has absolutely no willingness to run sustained trade deficits) the $ will have no competitor for reserve currency status.
Thor's Hammer , July 22, 2017 at 4:30 pmI don't buy that currencies have anything to do with US aggression
I'd be interested in opinions and rationale for the root causes of US Aggression, and if and how they morphed over time.
Yves Smith , July 22, 2017 at 5:03 pm"I don't buy that currencies have anything to do with US aggression. "
The US emerged from WWII as the sole surviving super-power, and as a final act, demonstrated that they were willing to use nuclear weapons against unarmed civilian populations in case anybody doubted them. In the ensuing years the US benefited immensely by having the dollar used as the world's reserve currency. This enabled it to import oil, the true currency of industrial civilization, by simply printing dollars and receiving oil in exchange for a few digital key strokes . Far more profitable (especially for finance capital) than actually having to produce grain or cars to sell to the world and earn foreign currency to import the oil.
The US went on to create the only global military empire, with 1400 military bases all over the world, while potential rivals Russia and China have at most a handful. I'd have to believe that the real threat posed by Russia is not its tanks and its advanced ABM missile defense system, but It's growing alliances for trading oil and natural gas outside of the dollar system. Qaddafi's attempts to sidestep the dollar and develop a gold-based African currency earned him a bayonet up the ass while Hillary Clinton watched on the spy satellite link and chortled insanely. I'm certain that the Democon/deep state handlers who created candidate Clinton and jerk on Trump's reins fervently wish the same fate for Putin.
Given this history, why do you believe that enforcing the US dollar as the world trading currency by all means necessary is not a key mission of the US military and all 17 "intelligence" agencies?
flora , July 22, 2017 at 5:40 pmLordie. This is the best you can do?
First, when the US started down this path, its priority was containing Communism. Eisenhower in his parting speech as President warned of the danger of the military-industrial complex subverting democracy. We have bases galore and grotesque exercises in pure pork like the F-35 because very powerfully placed insider interests have been able to create rationales for huge military spending.
Second, the original rationale was that countries that were democracies and traded with each other wouldn't go to war with each other and would be reliable allies against the Evil Commies. Multimational companies were thus seen as business ambassadors. Note they don't have to be US multinationals to achieve that end. But that implied promoting trade and protecting sea lanes were a big part of the anti-Commie push.
None of these have squat to do with the dollar.
steelhead23 , July 22, 2017 at 1:47 pm"The US Intelligence services were so intent on spying on their own citizens they made it more possible for their military not to matter."
No.
The intelligence services are closely tied to the military, may even be a branch of the military, but are not the battalions and troops on the ground. Troops on the ground come first. Very much.
The second thing is that the intelligence services have "out sourced" their staffing, in large part, to civilian contractors who may wear 2 hats (because markets): 1. work for the intelligence agencies gathering data for the govt, and 2. forward any data gleaned in their govt employment capacity to the private companies also hiring them. ( this is not tin foil theorizing.)
So, per your comment, no.
This is one of those posts that gives me cognitive dissonance, as if Randy Wray is whispering in one ear while Rickards yells in the other. More sovereign deficit spending is needed to drive economic activity, yet the growing mountain of debt threatens system stability. Are these two concepts even remotely reconcilable – a synthesis perhaps?
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Jul 21, 2017 | www.zerohedge.com
Authored via InternationalMan.com,... ... ...
The typical American day laborer has gained little.
And job competition from overseas made him feel like a loser. Now he wants walls – to keep out foreigners and foreign-made products. He wants win-lose deals that guarantee to make him a winner again.
He has no idea that he was set up by his own elite.
Former Fed chiefs Ben Bernanke and Alan Greenspan got their pictures on the cover of Time magazine. Most people think they are heroes, not rascals. Most people think they saved the economy from another Great Depression by dropping interest rates and injecting it with trillions of dollars in quantitative easing (QE) money.
Most people – even the POTUS – believe we need more fake money to "prime the pump" and get the economy rolling again.
Almost no one realizes it, but it was these stimulating, pump-priming, new credit-based dollars that fueled the trends that ruined America's working-class wage earner.
Overseas, his competitors used cheap credit to gain market share and take away his job. At home, the elite imposed their crony boondoggles their regulations and their win-lose deals – all financed with fake money.
The average American's medical care now costs him more than seven times more than it did in 1980. His household debt rose nearly 12 times since 1980.
... ... ...
Recently we've been wondering if it's possible that America could be on the brink of a second civil war. We did some digging and while the stuff we found may offend and shock you We recommend you take a look anyway by clicking here.
TeamDepends , Jul 21, 2017 6:32 PM
Captain Chlamydia -> TeamDepends , Jul 21, 2017 6:34 PMEverything "the elite" does betrays the working class.
Sonny Brakes , Jul 21, 2017 6:37 PMsilverer , Jul 21, 2017 6:42 PMAnd the working class played along knowing full well that they were being duped. Got to support the team.
GRDguy , Jul 21, 2017 6:42 PMMoney creation without productivity is a truly inspiring phenomenon.
They're not "elite," they're sociopaths. They lie and steal without empathy nor conscience.
People running independent businesses are not usually sociopaths. But top executives of major corporations usually are.
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Jul 16, 2017 | marknesop.wordpress.com
kirill , July 16, 2017 at 6:05 am
http://www.zerohedge.com/news/2017-07-15/3-examples-show-how-common-core-destroying-math-education-americaPatient Observer , July 16, 2017 at 7:08 amThe dumbing down of America is going full steam. This "Rube Goldberg math" is something else.
Common core math is indeed an abomination. It nearly destroyed my son's interest in math. I'm teaching him old school math. Of course, I am also supplementing his history lessons with alternative analyses and with a more comprehensive range of topics.yalensis , July 16, 2017 at 8:11 amAnother thing – most teachers of common core math at my son's public school do not understand it themselves. I noted errors in homework assignments which only compounded the confusion among the students.
One more thing – they are expected to learn from online videos and sloppily prepared study sheets – not a real math book. The school system is trying to make education paperless. This, to me, stunts the critical skills of eye-hand coordination, the ability to express abstract concept visually (e.g. making good sketches of ideas), etc. For example, mechanical drafting skills with the associated ability to visualize have been replaced by learning how to manipulate software.
Perhaps these are cost-cutting measures but the results is that the US public education system, from my experience, is in free fall.
Here is a tin-foil hat theory based on the linked article. If Bill Gates is promoting a method of education that stunts learning among the masses while sending his own kids to private school that does not use the same method, could this be a way help to create a society of dysfunctional masses ruled by a well-trained elites?
When it comes to Math, I think the traditional textbook approach is the best. For History and the social sciences, though, I would recommend replacing big textbooks with individual monographs and other study materials focusing on specialized themes.marknesop , July 16, 2017 at 9:57 amReason being: For Math, there is a standard (finite) set of facts and techniques that need to be mastered at the school level; whereas there is no such thing as a "standard" or finite sets of historical facts.
A commenter to the article suggested Microsoft was setting itself up to step seamlessly into public education when the IT bubble bursts.yalensis , July 16, 2017 at 10:53 amSomebody else suggested they are trying to prepare kids to become programmers of digital computers (like Bill Gates started out). But that doesn't make any sense either, because digital computers do not use this method to subtract. Instead, they use a method called "2's complement addition".Matt , July 16, 2017 at 11:16 amThis YouTube video explains quite clearly how it is done in binary computer registers: https://youtu.be/vfY7bN_3VKw
Computers do use binary arithmetic, but for a human to do so, it involves converting from base 10 to base 2 and then subtracting. In order to convert from base 10 to base 2, you have to follow a step-by-step procedure which involves the remainder.Compare converting from base 10 to 2:
https://mathbits.com/MathBits/CompSci/Introduction/frombase10.htm
to the image given in the ZH article of the new subtraction method being taught:
You can see there is some similarity in the thought process, "carrying" the remainder forward is the main lesson being taught.
https://ads.pubmatic.com/AdServer/js/showad.js#PIX&kdntuid=1&p=156204
marknesop says: July 16, 2017 at 9:55 amThat is just bizarre. One commenter suggested the methods might be geared toward more complex problems where numbers do not represent real things, but concepts; but I just can't see that, either. But then, I've never been good at math and was always afraid of it. Whatever the case, I would have dropped out of school in Grade Three if I'd had to learn this way. It makes math problems ten times more complicated than they need to be, and every time you introduce another step you introduce another possibility of making a mistake.likbez says:July 16, 2017 at 9:06 pmVery true ! I am pretty good in math but this is still too much artificially introduced complexity for me too. Still it would be a perfect way to work with roman numbers. And that's BTW why Arabic notation is so much superior.What a bunch of morons !!!
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Jul 17, 2017 | www.nakedcapitalism.com
Sluggeaux , July 13, 2017 at 1:52 am
Disturbed Voter , July 13, 2017 at 3:01 amMore asset-shuffling through public-private partnerships will not solve the moral catastrophe of short-termerism and greed that prevents enterprises from investing in the human timeframe of a lifespan, that might support a proper social safety net. A sane government which had the interests of all citizens at heart would impose a confiscatory tax system on asset shufflers and short term greed. This is the opposite of the policies of our political class, who prefer voter suppression to the sort of democracy that would find the impoverishment of our elders intolerable.
Enquiring Mind , July 13, 2017 at 1:42 pmWonderful insight, why I read comments.
Crazy Horse , July 13, 2017 at 3:24 pmVoters should say, en masse, "When I hear the phrase Public-Private Partnership, I reach for my gun."
Tomonthebeach , July 13, 2017 at 3:11 am"A sane government which had the interests of all citizens at heart" In the One Exceptional Country? Not in my lifetime or that of my children.
Its all very fine to talk about how wonderful your favorite band-aid would be if only the Repugnant or Democon team would support it, but in the real world there is only one semi-valid retirement strategy.
Emigrate to a country that is sufficiently un-exceptional to not have to support an Empire and which is poor enough to allow you to live on whatever savings or pension you have accumulated.
diptherio , July 13, 2017 at 1:10 pmThis larger role of government proposal overlooks the fact that is just creates more piggy banks for workers to raid to buy new cars, finance big ticket purchases, etc.
This human irrationality is common with today's IRAs. Congress has shown willingness to expand access to retirement savings in order for workers to raid their pots of gold. We have just seen this with legislation relaxing withdrawal in the federal TSP. Thus, how such programs are set up and administered is likely to merely expand financial asset management fees while collecting taxes and penalties to boost the treasury – with little improvement in retirement outcomes.
Moneta , July 13, 2017 at 7:35 amthe fact that is just creates more piggy banks for workers to raid
Bad workers! Wanting to have nice things! Don't they know only their corporate task-masters get to raid banks (piggy or otherwise)?
As always, greedy workers are the problem. Brilliant analysis [/sarc]
Dead Dog , July 13, 2017 at 12:56 pmThe first thing that government could do is guarantee an acceptable pension to all those who live past 80. Then we would not all have to save as if we will live to 95, bloating financial markets for nothing.
And it should be funded from current earnings, not through financial markets.
Moneta , July 13, 2017 at 4:36 pm80? Most of us don't get that far, Moneta
Try 55? That's what it used to be for Australian women .
Now, it's 70
washunate , July 14, 2017 at 12:19 pmWe just hit the peak of 5 workers per retiree. This number will be going to 2.5 over the next couple of decades.
I think you don't realize how low the standard of living has to drop to fund an age 55 retirement.
2/3 of boomers have less than something like 100k saved up so this means they will be asking the young to fund their retirement because I don't see the 1%ers doing it, without some huge transformation which would take a decade or two sidelining boomers anyway.
This situation should have been planned for 30-40 years ago but it wasn't because the general meme at the time was that the markets would save the boomers.
When a squirrel plans for winter, it stores nuts, meaning it does not eat them all.
In our economic system we've been eating all our nuts plus using millions of years of energy to eat even more than we needed. Our obesity epidemic is one blatant symptom. Even most of those with big investment portfolios have overindulged just think of how many joules of energy they have spent in their lifetimes yet they are still expecting their investments to represent claims on future resources.
I guess it can work out if our planet can support it and the US can force its way on the world for another few decades but I have trouble believing that a country with more than 30% of its population over 60 can cling to its reserve currency status while net importing.
I believe we can fund a 55+ retirement if most retirees accept to rent a room in their kids' house but the kids have to somehow get out of the basement of their parents' still mortgaged house and take possession of the main floor. That's the conundrum.
Moneta , July 13, 2017 at 7:42 amYeah, that's the question. Is retirement a universal human right or a privilege? This whole notion of focusing on the plight of the elderly as a group is bizarre. In the US context, older generations are significantly wealthier than younger generations.
If we are really talking about people living with dignity, then such a policy should apply to people of all ages, not just older Americans.
funemployed , July 13, 2017 at 8:19 amHealth care and retirement plans should not be through the employer because it promotes discrimination. These should be portable.
funemployed , July 13, 2017 at 8:26 amHow bout a UBI for the elderly and disabled, and free healthcare for everyone? Seems like the simplest solution to me.
Aside from the fact that it seems like the obviously right thing to do, as an oldish millennial, I'd prefer to have them out of the forced-labor market anyway.
Left in Wisconsin , July 13, 2017 at 7:46 pmI've also long thought that providing care for the elderly, disabled, and children could go a long way toward filling the roles of a job guarantee for us relatively young and able-bodied.
cocomaan , July 13, 2017 at 9:07 amOn the one hand, the job part of the job guarantee already exists almost everywhere in the U.S. The problem is the job stinks – low pay and often very hard work.
On the other hand, it is foolish, and inhuman, to think of these jobs as overflow job guarantee jobs in an MMT JG. We need an economy, and society, that values caring over (mostly idiotic) for-profit paid work.
Moneta , July 13, 2017 at 9:13 amHow bout a UBI for the elderly and disabled,
Maybe we can put "social" in the name, because it's the social safety net. And since it's a source of financial security, we should also put "security" in the name.
Wait! Wait, I got it!
katiebird , July 13, 2017 at 9:16 amBut isn't it based on earnings? Which for tens of millions were based on 10$ an hour which is not a livable wage thanks to CEO wage inflation going from 30x lowest wage to over 300x?
funemployed , July 13, 2017 at 9:42 amActually laughing outloud!!! OMG.
Except that I have. Friend who is struggling on $759/mo Social Security . who can live on that?
cocomaan , July 13, 2017 at 10:23 amLove it. That was my thought too. Just convert social security to a UBI. Maybe even one not tied to a regressive payroll tax.
jrs , July 13, 2017 at 2:06 pmJust to respond to all of you, the Townsend Plan from back in the 1930's when Social Security was being devised, pledged to give out $200/month to people of age: https://www.ssa.gov/history/briefhistory3.html According to an inflation calculator I used, that's $3400/month per person.
They actually paid out more like $50/month. Which is more like $900 in our money today.
Ida May Fuller was the first person ever paid out: https://en.wikipedia.org/wiki/Ida_May_Fuller interesting story.
washunate , July 14, 2017 at 12:23 pmSocial Security is fine, it just needs to be increased, and the age lowered (to at least what it used to be). Calling it a UBI, although it is one, will just lead to people trying to tie it to costs of living which varies widely across the country, it just needs to be increased a lot to be on par with what much of the rest of the world offers.
rjs , July 13, 2017 at 8:47 amAnd how about expanding this odd and surely un-American idea of providing security and care to people of all ages? Ridiculous, right?
Jim A. , July 13, 2017 at 8:48 amcoincidentially, i just read
" In 2016, California residents 62 and older took out more payday loans than any other age group, according to industry data compiled in a new report from the Department of Business Oversight. Seniors entered into nearly 2.7 million payday transactions, 18.4% more than the age group with the second-highest total (32 to 41 years old). It marked the first time that the DBO report on payday lending, published annually, showed seniors as the top payday lending recipients. The total transactions by the oldest Californians in 2016 represented a 60.3% increase from the number reported for that age group in 2013. The fees can bring annual percentage rates that top 400%. In 2016, the average APR was 372%, according to the DBO report. Customers typically take out multiple loans in a year, ending up in what critics call a "debt trap." .. The average payday loan borrower 62 years or older took out almost seven payday loans last year, compared with the average of 6.4 loans for all customers"Moneta , July 13, 2017 at 9:19 amIt is simply the case that with an ageing populace, we will in total be spending more on Cumadin, nursing home beds and depends than we used to. Pensions, public or private don't buy warehouses of this stuff to use later. A larger amount of our current GDP will be spent on this than on health club memberships and daycare than if our population wasn't ageing. Those who are currently working will have a greater percentage of the wealth that the create devoted to purchases of these goods and services than used to be the case when there were fewer elderly. Some of this may be paid for with higher payroll taxes, some with higher income taxes (because bonds in the SS trust fund) and some because the value of equities goes down as pensions become net sellers rather than purchasers of assets. The more people are looking for a magic and relatively painless solution, the further we are from actually figuring out how to do this.
Middle Class , July 13, 2017 at 6:35 pmThe thing is that many with underfunded guaranteed pensions will be getting good pensions while those with no guaranteed pensions will be getting peanuts.
Not to mention those with pensions based on 10$ per hour while others were making much more. Those who made more feel entitled to their money by they refuse to see how social, fiscal and monetary policies contributed to the wealth disparity. Many of the winners were not better but just at the place at the right time.
There has to be a redistribution within the older population first before we skim the pay checks of the young still working.
Yves Smith Post author , July 13, 2017 at 8:37 pmSo your solution includes taking money from those who saved and invested, and re-distribute it to those who spent everything they earned? As someone in the "saved and invested" category, I find that plan to be a non-starter.
When I was setting aside 15% of my income for savings and investments, paying extra on my mortgage, and driving older cars, I have friends who (at the same income level as my wife and I) literally spent everything they earned. They had lots of fun, and lots of new stuff that I didn't.
Fast forward 30+ years, and now – in my late 50's – I'm planning my retirement (before my 60th birthday). My friends? None of them are even thinking of retiring, and one couple has said they will need to work into their 70's.
We made different choices, and ended up in different places – but that doesn't obligate me to hand them what I have.
Sluggeaux , July 13, 2017 at 9:17 pmWhat a bunch of total nonsense.
If you've been able to work on a consistent basis at decent enough paying jobs that you could save, it is substantially due to luck: being born into a stable middle to upper middle class family, being white and male, being born at a time when there was enough growth in the economy that you could land good jobs early in your career, which is critical for your lifetime earnings trajectory. Oh, and not having you or a spouse or a child get a costly medical ailment that drained your savings. And not winding up in a job where you were being ethically compromised and stood up against it, resulting in career and earnings damage.
Did you miss that college grads had a worse time that high school grads and even dropouts in landing jobs in 2008-2010? And getting no or crap jobs then set them back permanently? And this includes graduates in the supposedly more "serious" STEM fields, where contrary to DC urban legend, there aren't a lot of entry level jobs. You do well if you find employment, but save in a few niches like petroleum engineering, the unemployment rate is actually worse for STEM college grads overall than liberal arts grads.
flora , July 13, 2017 at 9:40 pmYves, I think that Middle Class would acknowledge the "luck of the draw" on pension or not. It's just that neo-liberalism would only redistribute within the laboring classes, not from the looting .01 percent responsible. The Arnold Family Foundation cronies in Rhode Island are making your argument. Those who lucked into wage-earning with a pension shouldn't be the first redistribution.
Sluggeaux , July 13, 2017 at 10:45 pmIf almost all the increase in productivity and income over the past 30 years had not gone to the top 1%, where it is essentially exempt from SS taxes, there wouldn't be a problem.
If the Middle and Working Classes still earned the same share of national income they earned before Reaganomics there wouldn't be a problem. Lots of people with good incomes; those incomes almost all subject to SS deductions.Heraclitus , July 13, 2017 at 11:09 pmThe cap on Social Security tax is an inverted welfare benefit. One of many Reaganite cons adopted by the Clintonites/Obots.
Heraclitus , July 16, 2017 at 7:05 amI don't think the cap was invented by Reagan:
Moneta , July 13, 2017 at 11:26 pmYour response to Middle Class puzzled me. It is undoubtedly true that there is luck involved in his success. However, he was comparing himself to peers that seemingly had most of the same luck but made different life choices. I think one can recognize his luck and his thrift and appreciate them both.
AnnieB , July 13, 2017 at 7:55 pmIt's not my solution. It's how the cookie will probably crumble. I'm in my late 40s and I'm in the category who saved but I also realize that I was in the lucky group with extra income and chances are I'm going to pay for that luck.
I am planning my future around those odds.
Moneta , July 13, 2017 at 11:32 pm"There has to be a redistribution within the older population first before we skim the pay checks of the young still working."
Increased taxes on the social security of wealthy people has been proposed, so has increased Medicare premiums for wealthy people. These ideas were part of the "grand bargain" proposed by some Republicans and Democrats, including Hilary Clinton.
What is considered "wealthy" in these proposals has yet to be determined. I don't think that the "grand bargain" specified that the increased revenue would be used to help impoverished seniors either. Anyway, how much of a surplus would these increased taxes generate ? Enough to give poor retirees a meaningful cost of living rebate on their tax returns?
I'm not necessarily against proposals such as these, but
a better and more certain solution would be to rein in the military/security complex, stop all the wars for oil, and get the government back in the business of working for the citizens of this country. I bet we could find a few extra dollars that way.Mel , July 13, 2017 at 1:17 pmIf you stop investing in the MIC you will send the signal that you are weakening and renouncing being the "protectors" of the planet. This means potentially losing your reserve currency status. That means you would lose your easy money printing and net importing advantages.
Yves Smith Post author , July 13, 2017 at 8:45 pmThe currency issuer can create new spending with the constraint being generating too much inflation.
I worry about leaving this statement to stand alone, because The Market is an independent thing, and it's in The Market that inflation is created or not. Players out there are capable of creating inflation on their own. Abba Lerner's article on Functional Finance (linked here a month or so ago) tells us that the remedy is taxation. I.e. spending to generate well-being shouldn't be blamed for inflation. Applying the taxation remedy will take some political backbone.
flora , July 13, 2017 at 9:33 pmNo, inflation is created in the real economy due to any of commodites inflation (cost-push inflation), wage-pull inflation (created by too much demand, or in MMT terms, too much net government spending) and more recently and not sufficiently acknowledged, by monopolies and oligopolies (see pricing of cable services and drugs, which have monopolies via patents) . Interest rates are a different matter and are controlled by the central bank. We've had risk-free interest rates below the inflation rate for years now thanks to the ministrations of the Fed.
Central banks have the power to kill the economy (raising interest rates so high that it induces inflation) but not much/any power to stimulate (save goosing asset prices, which only trickles down a bit to the real economy). The cliche is "pushing on a string".
Chris , July 13, 2017 at 10:28 pmI'm a great supporter of Social Security. There's nothing inherently wrong with Social Security. The problem has been the politicians. In the mid-1980s the Reagan admin with Dem support changed CPI price calculations (and have been doing so ever since) in order to make any cost-of-living inflation adjusted increase in SS be less than the true CPI inflation numbers. They also made something like the first $25,000.00 of retiree income (all sources) tax exempt . but did not index that number to inflation. They were clever in hiding the time erosion aspects of that "grand bargain." They also raised the retirement age. They used the "saved" monies these changes to pay for tax cuts for the well off.
I think adding another mandatory paycheck deduction for private savings accounts controlled by others would simply be another pot of money for politicians and Wall St firms to rummage. Fees? Churn? "Special" tax treatment? I appreciate the good intentions of the proposal. However, I'd rather see proposals for stronger protections and honest CPI accounting for existing Social Security.
adding: the number of workers to retirees is less important than the productivity per worker, which has been going up steadily for the past 40 years. If workers were still earning the share of income from productivity and profits that they earned up until Reagonomics there wouldn't be a problem. Since Reaganomics, however, almost all the gains in productivity and income have gone to the top 1-2%. Meaning that most of the productivity gains are not reflected in SS taxes. The top 1% pay SS security tax on only a tiny, tiny bit of their income. So less and less national total income is subject to SS tax. Falling SS tax receipts are less a function of fewer-workers-to-retirees than to less nation total earned income subject to SS tax. imo.
DumbDave , July 13, 2017 at 10:55 pmIs no one talking about just abolishing the income cap on social security taxes anymore? I thought I read somewhere that would largely fix any holes in the program and allow retirees to get the COLA that they need to keep up with inflation
Ep3 , July 16, 2017 at 1:10 pm"The currency issuer can create new spending with the constraint being generating too much inflation".
The problem with this is money. Money >> currency. As we have seen, the market can create its own money independent of the currency issuer, making inflation/deflation difficult for the monetary authority to control, e.g. the Eurodollar market.
Does anyone know anyone who has retired and lived solely on their 401k, just like a pension? And this person did not inherit any large chunk of money to assist in providing retirement funding. I want an example of a factory worker, McDonald's worker, etc where they were part of the working class.
Why not just expand social security? I understand she advocates in addition to SS we have this mandatory investing thru public/private partnerships.
But when you have that, doesn't the govt have to establish guaranteed rate of return? Because when people invest, there has to be a winner and a loser, always. Otherwise, some people's investments may not make a return enough to support them financially.
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Jul 17, 2017 | www.nakedcapitalism.com
diptherio , July 12, 2017 at 12:09 pm
No Way Out , July 12, 2017 at 12:32 pmAll that, and not one mention of fraud how convenient.
JEHR , July 12, 2017 at 12:57 pmFraud? They're professionals.
grizziz , July 12, 2017 at 1:00 pmdiptherio, that was my thought also as I read more and more rapidly down the article. Fraud seems to have disappeared from financial discussions altogether.
hemeantwell , July 12, 2017 at 2:02 pmI believe fraud is covered under #5 as 'innovation.'
ChrisPacific , July 12, 2017 at 9:57 pmConvenient is putting it mildly. About 2/3 of the way through I was waiting for a reference to Keynes, or Minsky, or Marx or ! and this is from my reading of Geoffrey Ingham's "The Nature of Money" ! Weber but instead found him coasting into some general behavioral precepts before landing without reference to anyone. It's like we're witnessing Spinoza concoct a system, rather than an economist talk about the importance of dropping models that have been under attack, and via arguments that are much more specific, for decades.
ChrisPacific , July 12, 2017 at 11:56 pmI think this model handles fraud a lot better than the EMT does. If you accept that individuals make decisions based on a collection of subjective heuristics unique to that individual (which may not bear more than an indirect relationship to rationality) then you need to consider the possibility that those heuristics might be manipulated by an outside party for the purpose of separating said individual from their cash. Which would cover a wide range of behaviours, from fraud to lesser examples like marketing (which is also not modeled by the EMT).
On a first impression it seems to be at least approximately consistent with reality and how people behave, which puts it ahead of EMT and most modern economic theory right off the bat, but it looks like more work is needed to get it to a point where it becomes a developed model capable of making falsifiable predictions.
paul , July 12, 2017 at 12:13 pmI also take exception to the definition of 'rationality' as the solution to an optimization problem based on a universal utility function in which everything can be measured by a single number and is directly comparable to everything else. To the extent this article uses the term, it seems to be adopting the standard utility maximization definition, which means it's more of a minor heresy than a completely new theory.
Sue , July 12, 2017 at 2:21 pmSo adaptive markets are pretty much the same as rational ones, just taking a slightly more roundabout route to those optimal outcomes? Never been taken with the invocation of evolution outside biology. A lot of bacteria get killed before they find a way round a decent antibiotic.
Evolution at the speed of thought has me quite baffled.
This piece sounds
