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Financial skeptic

The more things change in the USA casino capitalism the more they stay the same

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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

Note: Some thoughts  on 2019  added on Jan 3, 2019.

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.

Some thoughts  on 2019

It was clear that 2017 stock market run was detached from fundamentals. Mostly speculative run. And the current stock market decline could well happen three months aerler or three month later but it was in the cards. It is difficult to estimate the power of inertia in such speculative runs. Also layoffs and decline of the standard liming of workers and lower middle class still can continue to improve the balance sheet until "Yellow Vests" moment stops them.

Jobs created now are mostly "inferior" low paid or temp/contractor jobs and the numbers just mask the cruel reality of the USA job market.

Which in reality is dismal, especially for young and old workers. several more or less paid specialties disappeared in 2018 due to automation (cash office worker is one). automatic cashier is supermarkets are also now more visible.  So spontaneous cases of vandalism, killings of coworkers and other form of "action of desperation" (as well as the rate of death from opioids -- which is yet another form of the same) would not be too surprising in such an atmosphere. Even with the power of the current national security state. Trump is playing with fire trying to cut on food stamps and implementing some other action in this program of "national neoliberalism" which is in internal policy is almost undistinguishable from neofascism.  He risk facing "Macron situation" sooner or later.

In any case at some point Minsky moment should arrive for the stock market. I am not sure that the current decline is that start of such an event. It might be postponed further down the line for a year or two.  But it will eventually come.  We can only guess what form it might take, but with the current Apple troubles and valuations of tech sector I think it might take the form of something similar to dot-com bubble deflation No.2

I do not see Amazon, Google, Facebook and Microsoft and other tech high flyers completely immune to the stock crash of 50% magnitude or more. For example, Google is overly dependent on advertising revenue which can grow only by strangulating small sites owners which use it as the advertizing platform (which it successfully implements fro several years now). But at some point owners might revolt and start dropping it for Microsoft or other platform.  Facebook might face a backlash, if people understand that selling data about them in the part of the business model, not an aberration.

One of the most unexplainable things that happened in 2018 was dramatic fall of oil prices in the Q4. This was quite surprising (and destructive) after the period of little or no capital investment in the new fields for three years or so.  Shale oil production increases in the USA are only possible if junk bonds can be produced along with it. Junks bonds that will never be paid. With the current debt load and prices below $50 most of the USA shale oil companies are zombies. Most if not all of thenm are losing money.  Only return of ~$70 oil prices can save them, if anything at all. WSJ touched this topic recently.

So this surprising fall of oil prices (from around $70 to around $43 WTI) looks connected to the speculations in the "paper oil" market.

Financialization allows for oil price to be completely detached from fundamentals for a year or even two (Saudis need over $80 I think to balance the budget, I think; this represents "fair price" as they are one of the three largest producers).

But you will never know this unless there are shortages at gas stations. The difference is covered by inflated statistics from IEA and similar agencies as well as "paper oil" -- future contracts which are settled in dollars.

This is the reality of "casino capitalism" ( aka neoliberalism ) with its rampant and destructive financialization.


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[Mar 23, 2019] College admissions scandal Wealthy parents told to make deal or face more charges - Los Angeles Times

Mar 23, 2019 | www.latimes.com

Federal prosecutors are seeking potential deals with some of the wealthy parents charged in the sweeping college admissions scandal as investigators continue to broaden the case, according to multiple sources with knowledge of the situation.

One source said some of the parents are being given a short window to consider a deal or potentially face additional charges.

It's unclear which parents prosecutors hope to seek out for cooperation, but sources said authorities were interested in getting a better picture of how the scam worked. The sources requested anonymity because they were not authorized to speak publicly on the matter.

[Mar 22, 2019] America's Apartheid of Dollars

Notable quotes:
"... The divisions can always be jacked up. "My opponent is a white nationalist!" and so he doesn't just think you're lazy, he wants to kill you. Convince average Americans to vote against their own interests by manipulating them into opposing any program that might benefit black and brown equally or more than themselves. ..."
"... Listen for what's missing in the speeches about inequality and injustice. Whichever candidate admits that we've created an apartheid of dollars for all deserves your support. ..."
Mar 22, 2019 | www.theamericanconservative.com

The birth lottery determines which of those three bands we'll sink or swim together in, because there is precious little mobility. In that bottom band, 81 percent face flat or falling net worths ( 40 percent of Americans make below $15 an hour) and so aren't going anywhere. Education, once a vehicle, is now mostly a tool for the preservation of current statuses across generations, to the point that it's worth paying bribes for. Class is sticky.

Money, not so much. Since the 9.9 percent have the most (except for the super wealthy at least), they have the most to lose. At their peak in the mid-1980s, the managers and technicians in this group held 35 percent of the nation's wealth. Three decades later, that fell 12 percent, exactly as much as the wealth of the 1 percent rose. A significant redistribution of wealth -- upwards -- took place following the 2008 market collapse, as bailouts, shorts, repossessions, and new laws helped the top end of the economy at cost to the bottom. What some label hardships are to others business opportunities.

The people at the top are throwing nails off the back of the truck to make sure no one else can catch up with them. There is a strong zero sum element to all this. The goal is to eliminate the competition . They'll have it all when society is down to two classes, the 1 percent and the 99 percent, and at that point we'll all be effectively the same color. The CEO of JP Morgan called it a bifurcated economy. Historians will recognize it as feudalism.

You'd think someone would sound a global climate change-level alarm about all this. Instead we divide people into tribes and make them afraid of each other by forcing competition for limited resources like health care. Identity politics sharpens the lines, recognizing increasingly smaller separations, like adding letters to LGBTQQIAAP.

Failed Georgia gubernatorial candidate Stacey Abrams, herself with presidential ambitions, is an example of the loud voices demanding more division . Contrast that with early model Barack Obama at the 2004 Democratic National Convention, who pleaded, "There's not a black America and white America and Latino America and Asian America; there's the United States of America."

The divisions can always be jacked up. "My opponent is a white nationalist!" and so he doesn't just think you're lazy, he wants to kill you. Convince average Americans to vote against their own interests by manipulating them into opposing any program that might benefit black and brown equally or more than themselves. Keep the groups fighting left and right and they'll never notice the real discrimination is up and down, even as massive economic forces consume all equally. Consumption becomes literal as Americans die from alcohol, drugs, and suicide in record numbers .

Meanwhile, no one has caught on to the fact that identity politics is a marketing tool for votes, fruit flavored vape to bring in the kiddies. Keep that in mind as you listen to the opening cries of the 2020 election. Listen for what's missing in the speeches about inequality and injustice. Whichever candidate admits that we've created an apartheid of dollars for all deserves your support.

** The author doesn't really drive for Uber but his conversation with the Spaniard was real.


JeffK March 22, 2019 at 7:39 am

Mr Van Buren. This piece nails it. The Democrats made a huge mistake focusing on race and LGBTQ instead of class. Their stated goal should be to replace race based affirmative action with class-based programs.

If there is serious violence coming to America it will come during the next major recession/financial crisis. The ARs will come out of the closet when, during the next financial crisis, the elites are bailed out (again), yet the riff raff lose their homes and pickups to foreclosure.

I am very pessimistic in this area. I believe the elites, in general, are agnostic to SJW issues, abortion, job loss, BLM, religious liberty, and on and on. The look at the riff raff with amusement, sparring over such trivial things. Meanwhile, the river of cash keeps flowing to their bank accounts.

Imagine if the digital transfer of money was abolished. Imagine if everybody had to have their money in a local bank instead of in an investment account of a major bank. Imagine if Americans saw, day after day, armored vehicles showing up at local banks to offload sacks of currency that went to only a few individual accounts held by the very rich.

Instead, the elites receive their financial statements showing an ever increasing hoard of cash at their disposal. They see it, but nobody else does. However, if everybody saw the river of wealth flowing to the elites, I believe things would change. Fast. Right now this transfer of wealth is all digital, hidden from the view of 99.99% of Americans and the IRS. And the elites, the banking industry, and the wealth management cabal prefer it that way.

It's easy to propose the ultimate goal of the elites is to have a utopian society to themselves, where the only interaction they have with the riff raff is with subservient technicians keeping it all running. Like the movie Elysium.

https://youtu.be/QILNSgou5BY

Oleg Gark , says: March 22, 2019 at 8:22 am
When feudalism comes to America, it will be justified by Libertarianism. With government defined as the bad guy, there's nothing to stop the 1% from organizing everything to their own benefit.

On the other side of the political spectrum, identity politics emphasizes people's differences and tribal affiliations over their shared citizenship. This prevents them from making common cause.

Fundamentally, these trends make the body politic so weak that it becomes susceptible to takeover by authoritarians that represent narrow interests.

Johann , says: March 22, 2019 at 8:31 am
"His skin was clearly a few shades darker than mine, though he pointed out that was only because my relatives came from the cold part of Europe and he came from the sunny part."

The Spanish in Europe got their color from the Moorish invasion, not the sun.

More of my annoying trivia that has little to do with the subject of an article.

John D. Thullen , says: March 22, 2019 at 9:15 am
Welp, the Democratic Party, by and large, believes all Americans regardless of class, race, religion, and gender should have guaranteed equal access to affordable healthcare, a substantial minimum wage, education and the rest.

Stacy Abrams wants these items too, along with equal access to the voting franchise.

"Until slavery was ended in the United States, human beings were legally considered capital, just like owning stocks and bonds today. But the Spaniard knew enough about history to wonder what reparations would be offered to the thousands of Chinese treated as animals to build the railroads or the 8,000 Irish who died digging the New Basin Canal or the whole families of Jews living on the Lower East Side of New York who were forced to employ their children to make clothing for uptown "white" stores. Later in the same century, wages were "voluntarily" cut to the bone at factories in Ohio to save jobs that disappeared anyway after the owners had wrung out the last profits."

That would be an excellent point if your inner Spaniard concluded reparations should be offered to the others as well, but ends up being merely tendentious if he contends that no one gets reparations.

But will you like it if the Democratic Party makes that part of their platform too?

I was born in Middletown, Ohio alongside the elegiacal hillbillies, who, by the way, didn't care for the blacks on the other side of the tracks anymore than my Armco-employed grandfather did, and certainly the business owners who disappeared the jobs and cut wages while voting for the so-called free traders were of the same ilk.

I didn't know any Democrats among any of my family's circle and, by the way, Middletown might as well have been south of the Mason Dixon anyway for all the white Democrats in town who gave not a crap about their fellow black citizens, certainly not the business owners who disappeared the jobs while voting for the so-called free traders.

It was the Republican Party (Larry Kudlow, I'm gunning for you) who championed creative destruction and the red tooth and claw of unfettered worldwide competition without asking, in fact jumping for joy, what the unintended consequences would be because the consequences were intended smash the unions for all, cut wages and benefits and hand the booty to shareholders, move operations to lower-tax, lower wage, environmentally unregulated parts of the globe to manufacture them thar high margin MAGA hats for the aggrieved.

What a beautiful grift!

Hello, Marianas.

That Democrats jumped on the bandwagon is no credit to them, especially while assuming the prone position as the republican party frayed the safety net.

True, the republicans laid off everyone, regardless of race, gender, and class and then cut everyone's benefits.

How equable of them.

TomG , says: March 22, 2019 at 9:44 am
As the Spaniard rightly understood, one can look way back into our history and see that the moneyed class has always used identity politics in economic control games to divide and conquer. That the Republicans rail on this as some evil creation of the modern Democrat is laughable at best. That the sheep who follow the party mouth pieces of the moneyed class in this media age can still be so easily manipulated is rather pitiful. Making common cause for the general welfare has never really sunk in as an American value.

Divide and conquer remains our true ethos. As the dole gets evermore paltry the only seeming options remaining are common cause for a common good or greater violence. One requires us to find a contentment beyond the delusional American dream of becoming that 1 to 10%. The other just requires continued anger, division and despair.

JoS. S. Laughon , says: March 22, 2019 at 10:12 am
Ironically the view that race/culture isn't at all important and should be disregarded in view of the class division (a "distraction"), is pretty much endorsing the classic Marxist critique.
ProletroleumCole , says: March 22, 2019 at 10:27 am
It's easy to notice divide and conquer when it's hate against those of the same class but are of a different culture/race.

But what's *difficult* to notice is identifying with the elites of your race in a positive way.
A lot of people, especially with the onset of realityTV, tend to think rich people are just like them (albeit a little smarter). The methods and systems to keep power aren't considered. They're made non-threatening. So many billionaires and politicians act effete today to stoke this image.

Lynn Robb , says: March 22, 2019 at 10:31 am
"Whichever candidate admits that we've created an apartheid of dollars for all deserves your support."

So we're supposed to vote for Bernie Sanders?

Connecticut Farmer , says: March 22, 2019 at 11:30 am
" Whether your housing is subsidized via a mortgage tax deduction "

This jumped off the screen. I wonder how many people even realize that. Probably the same number who still believe that social security is a "forced savings".

Connecticut Farmer , says: March 22, 2019 at 11:47 am
Not to put too fine a point on it but clearly we are wasting our time arguing. As long as the current system of government remains in effect it will be same old same old.

Many changes are in order–starting with this archaic remnant of a bygone era called "The Two Party System".

Lert345 , says: March 22, 2019 at 12:05 pm
Spaniards are indeed Hispanic. The definition of Hispanic relates to a linguistic grouping – that is, relating to Spain or Spanish speaking countries. Your friend would indeed qualify for all sorts of preferences according to the definition.

As to being a POC, I could not locate any definition as to what threshold of skin tone qualifies someone as a POC. I wager none yet exists but will be forthcoming.

Johann

As for the skin tone of Spaniards, many in the south have the Moorish influence,however, in the rest of the country skin tones range from light beige to very fair. Rather similar to Italians, actually.

Dave , says: March 22, 2019 at 12:18 pm
First, kudos to Van Buren for getting a Seamless delivery while driving. That's not easy to coordinate. Second, I look forward to more conservative policies addressing poverty, drug addiction and access to health care. This article adds to the 10-year rant against what Democrats have done or want to do.

Like nearly every Republican of the last 10 years, Van Buren offers none here. But I'm sure once the complaining is out of his system, they will arrive.

david , says: March 22, 2019 at 12:31 pm
" Whether your housing is subsidized via a mortgage tax deduction "

Sorry, not taking your money is NOT subsidizing!

I thought this is a "conservative" idea to begin with? Apparently, it is not true even here.

Jealousy that others can keep their money is driving the worse instinct of many republicans.

Sigh.

Vincent , says: March 22, 2019 at 12:32 pm
Your Spaniard friend also has it all wrong. The real division line is between those willing to initiate coercion for their own self-righteousness and those who refuse to. Anyone that supports government is one-in-the-same, regardless of color or class.
LouB , says: March 22, 2019 at 12:35 pm
Thirty years ago I'd be asking who printed the canned response pamphlet to give prepared talking points to enable anyone to provide quick sharp tongued witty criticisms of anything they may encounter that didn't tow the party line.

Now I gotta ask where do I download the Trollware to accomplish the same thing.

Sharp article, thanks.

JonF , says: March 22, 2019 at 12:42 pm
The Moors were a tiny class of invaders who left rather little imprint on the Spanish genome. That was true of the Romans and the Goths as well. Spanish genes are mostly the genes of the pre-Roman population: the Iberians in the south (who maybe migrated from North Africa), Celts in the north, and the indigenous Basques along the Pyrenees.
WorkingClass , says: March 22, 2019 at 2:27 pm
Yes. And thank you. It's a class war and the working class, divided, is a one legged man in an ass kicking contest.
Carolyn , says: March 22, 2019 at 3:36 pm
Outstanding piece!
Dave , says: March 22, 2019 at 3:39 pm
What happened to "a rising tide lifts all boats"? We've been promised for decades that the wealth generated by those at the very top would "trickle down." This was a cornerstone of Reaganism that has been parroted ever since.

There have been naysayers who say that that theory was fantasy and that all we would have is increased wealth disparity and greater national deficits.

How peculiar.

Peter Van Buren , says: March 22, 2019 at 4:06 pm
A rising tide lifts all yachts.
-- author Morris Berman

[Mar 22, 2019] It Feels Eerily Like 2007 - DoubleLine's Gundlach Blasts Fed's Unprecedented Reversal

It does feel like in 2017. But that does not means much as economy changed substantially and probably nor in the right direction... Purchasing power of population probably was eroded despite growth of absolute numbers of customers because of decimation of well paying jobs. Also the market now is dominated by HFT which serves as an amplifier of pre-existing trend and can by itself course a crash or mini crash. Another factor is oil prices.
But the idea of disconnect if a very useful idea and many other analysts predicted negative year for S&P500. I see dot-com bubble No.2 here, not so much subprime mortgages problem of 2008. Subprime exists now in junk bond produced by shale oil players, but it is much less in size.
Mar 22, 2019 | www.zerohedge.com

He said the stock market, for now, "likes the fact that they (the Fed) aren't going to give them any problems."

But things could change quickly and dramatically, he said, with his final comment, the most ominous:

"It feels eerily like '07," he said.

" The stock market is near its high and the economy is noticeably weaker - and yet everyone is saying 'Everything is Great! '"

And just in case you wondered how bad the underlying is - despite equity market's enthusiasm - Citi's Economic Data Change index as its worst level since 2009...

[Mar 22, 2019] Responding to some of the critiques of our paper on secular stagnation and fiscal policy

Mar 22, 2019 | larrysummers.com

My paper with Lukasz Rachel on secular stagnation and fiscal policy summarized here has attracted a number of interesting responses including from Martin Wolf , David Leonhardt , Martin Sandbu and Brad DeLong and also many participants at the Brookings conference.

I'm gratified that there seems to be general acceptance of the core secular stagnation argument. "Normal" policy settings of real interest rates in the 2 percent range, balanced primary budgets and stable financial markets are a prescription for stagnation and underemployment. Such economic success as the industrial world has enjoyed in recent decades has reflected a combination of very low real rates, big budget deficits, private leveraging up and asset bubbles.

No one from whom I have heard doubts the key conclusion that a combination of meaningfully positive real interest rates and balanced budgets would likely be a prescription for sustained recession if not depression in the industrial world.

Notice that this is a much more fundamental argument than the suggestion that the some effective lower bound on interest rates may impede stabilizing the economy. The argument is that because of chronic private sector tendency towards oversaving, economies may be prone to underemployment and financial stability absent policy responses which are themselves problematic.

This is an argument much more in the spirit of Keynes, the early Keynesians, and today's Post-Keynesians than the New Keynesians who have set the terms for much of contemporary macroeconomic discourse both in academia and in the world's central banks.

The central feature of New Keynesian models is an idea that economies have an equilibrium to which they naturally revert independent of policies pursued. Good central bank policy achieves a desired inflation target (assumed to be feasible) while minimizing the amplitude of fluctuations around that equilibrium.

In contrast contemporary experience, where inflation has been below target almost throughout the industrial world for a decade and is expected by markets to remain below target for decades, and where output is sustained only by large budget deficits or extraordinary monetary policies, suggest that central banks acting alone cannot necessarily attain inflation targets and that misguided policy could easily not just raise the volatility of output but also reduce its average level.

While there seems to be little doubt that real interest rates–short and long, ex ante and ex post -- have declined very substantially even as (other things equal) budget deficits and expanded social security programs should have increased them, there remains debate about how to analyze these trends. Lukasz and I argue that adjustment to balance saving and investment is the best way understand declining real rates. DeLong wonders about changing risk premiums and Wolf cites BIS work arguing that low rates reflect the monetary policy regime. There is no reason why there needs to be only one cause of low real rates so these factors may enter. But as I expect we will illustrate in the revised version of the paper, the largest part of the low frequency variation in ex ante real returns is accounted for by a downward trending factor common to all asset prices. This is illustrated for the US in the figure below. So risk premiums or factors specific to Treasuries are likely not high order.

Figure: Decline in US real asset returns

Granting that secular stagnation is a problem, there is the question of policy response. The right policy response will be the one that assures that full employment is maintained with a minimum of collateral problems. Sandbu argues against the notion of secular stagnation in part because he thinks it may lead in unconstructive directions like protectionism and because he believes that stagnation issues can be feasibly and relatively easily addressed by lowering rates. Wolf, relying on the BIS, is alarmed by the toxic effects of very low rates on financial stability in the short run and economic performance in the long run, and prefers fiscal stimulus. Leonhardt prefers a broad menu of measures to absorb saving and promote investment.

I am not certain of the right approach and I wish there was more evidence to bring to bear on the question. I can certain see the logic of the "zero is just another number" view, that holds that the current environment poses no new fundamental issues but just may require technical changes to make more negative interest rates possible. I am skeptical because (i) I am not sure how large the stimulus effect of rates going more negative is because of damage to banks, reduced interest income for consumers, and because capital cost is already not the barrier to investment; (ii) I wonder about the quality of any investment that was not made at a zero rate but was made at a negative rate; and (iii) I suspect that a world of significantly negative nominal rates if sustained will be a world of leveraging, risk seeking and bubbles. I have trouble thinking about behavior in situations where people and firms are paid to borrow!

I am inclined to prefer more reliance on reasonably managed fiscal policies as a response to secular stagnation: government borrowing at negative real rates and investing seems very attractive in a world where there are many projects with high social returns. Moreover, we are accustomed to thinking in terms of debt levels but it may be more appropriate to think in terms of sustained debt service levels. With near zero rates these are below average in most industrial countries. The content of fiscal policies is crucial. Measures which run up government debt without stimulating demand like large parts of the Trump tax cut are ill advised. In contrast measures which promote investment and raise the tax base down the road are much more attractive.

There are of course other measures beyond stabilization policies like fighting monopolies, promoting a more equal income distribution, and strengthening retirement security for which the desire to maintain macroeconomic stability provides an additional rationale.

[Mar 21, 2019] OPEC February Production Data " Peak Oil Barrel

Mar 21, 2019 | peakoilbarrel.com

HuntingtonBeach x Ignored says: 03/19/2019 at 1:20 am

"Perfect Storm" Drives Oil Prices Higher

"The latest Brent rally has brought prices to our peak forecast of $67.5/bbl, three months early," Goldman Sachs wrote in a note. The investment bank said that "resilient demand growth" and supply outages could push prices up to $70 per barrel in the near future. It's a perfect storm: "supply loses are exceeding our expectations, demand growth is beating low consensus expectations with technicals supportive and net long positioning still depressed," the bank said.

The outages in Venezuela could swamp the rebound in supply from Libya, Goldman noted. But the real surprise has been demand. At the end of 2018 and the start of this year, oil prices hit a bottom and concerns about global economic stability dominated the narrative. But, for now at least, demand has been solid. In January, demand grew by 1.55 million barrels per day (mb/d) year-on-year. "Gasoline in particular is surprising to the upside, helped by low prices, confirming our view that the weakness in cracks at the turn of the year was supply driven," Goldman noted. "This comforts us in our above consensus 1.45 mb/d [year-on-year] demand growth forecast."

https://oilprice.com/Energy/Energy-General/Perfect-Storm-Drives-Oil-Prices-Higher.html

[Mar 20, 2019] Bad Blood - Secrets and Lies in a Silicon Valley Startup by John Carreyrou - Observations by Walrus.

Notable quotes:
"... I read this book over two nights and it unfortunately brought back my own experiences of working for a narcissist to the point of causing sleeplessness and indigestion. ..."
"... However the pattern of behavior at Theranos was ingrained and consistent - "an orchestrated litany of lies" as a judge has said in another matter. ..."
"... This is a similar personality type with a different set of risks. These people are common in finance and medicine: https://www.theatlantic.com... ..."
"... In the absence of a moral filter, says Martha Stout[1], "Politicians are more likely than people in the general population to be sociopaths...That a small minority of human beings literally have no conscience was and is a bitter pill for our society to swallow–but it does explain a great many things, shamelessly deceitful political behavior being one." ..."
turcopolier.typepad.com

I wrote in 2010 at SST on the characteristics and dangers associated with narcissistic leadership. "Bad Blood' by John Carreyrou chronicles the rise and fall of Theranos, a Silicon Valley healthcare startup founded and run by Elizabeth Holmes, a card carrying narcissist if ever I saw one.

This book, in my opinion, paints such a detailed and comprehensive picture of the way these creatures operate that I thought it worthwhile to bring it to the attention of SST members who may doubt my warnings of the dangers of allowing such folk near the levers of power in business and, worse, Government.

I read this book over two nights and it unfortunately brought back my own experiences of working for a narcissist to the point of causing sleeplessness and indigestion.

Under the direction of the charismatic Holmes, Theranos burned through some $900 million in investors funds before being found out in 2015. Their blood testing business was a sham that endangered patients. The company's key business strengths were the "reality distortion field" Elizabeth Holmes projected over investors and directors and the twin weapons of secrecy and fear they wielded over their employees.

Disbelievers my argue that start up companies sometimes require desperate measures to stay afloat and that you cannot make an omelette, etc. etc. However the pattern of behavior at Theranos was ingrained and consistent - "an orchestrated litany of lies" as a judge has said in another matter.

If you wish to perhaps be a little forearmed against the day that you perhaps must engage with one of these creatures it would be well to understand the cautionary tale of Theranos. https://www.amazon.com/Bad-Blood-Secrets-Silicon-Startup/dp/152473165X https://turcopolier.typepad.com/sic_semper_tyrannis/2010/05/walrus-on-narcissistic-leaders-.html

jnewman , 3 hours ago

This is a similar personality type with a different set of risks. These people are common in finance and medicine: https://www.theatlantic.com...
Godfree Roberts , 8 hours ago
In the absence of a moral filter, says Martha Stout[1], "Politicians are more likely than people in the general population to be sociopaths...That a small minority of human beings literally have no conscience was and is a bitter pill for our society to swallow–but it does explain a great many things, shamelessly deceitful political behavior being one."

My study of Chinese government revealed an important truth -- one that explains much about that country's rapid rise: they find our amateur, promise-driven, personality-based governance repulsive. They would no more vote for amateur politicians than for amateur brain surgeons. To them charm, good looks, quick wits and rhetorical skill signify shallowness, instability and glibness. Altruistic politicians have been fundamental to Chinese governance for two millennia.

Their political stars have always been experienced, scholarly, altruistic problem-solvers chosen on merit after decades of testing.

In 1000 AD, during our Dark Ages, with just one scholar-official for every eight thousand citizens, China was harmonious, technologically advanced and prosperous. Emperors and dynasties came and went while loyal, disciplined–often courageous–civil servants lived far from family, serving in remote regions under terrible conditions.

Confucius'[2] moral meritocracy and the rigors of the job discouraged sociopaths and officials integrity, efficiency and entrepreneurial energy made China the most advanced civilization on earth.

So highly do the Chinese esteem their best politicians that they deified one whose legacy, a water diversion project, has repaid its capital investment every twenty-four hours for 2,270 years. Millions visit his shrine, which is built overlooking his masterpiece, every year to offer incense and sincere thanks.

The altruistic tradition is remembered in a Singapore Government White Paper, "The concept of government by honorable men who have a duty to do right for the people and who have their trust and respect fits us better than the Western idea that government power should be as limited as possible."

And would-be members of China's Communist Party take an oath to "Bear the people's difficulties before the people and enjoy their fruits of their labors after the people". They often fail, obviously, but at least they've got something to shoot for–and a standard that the other 1.3 billion non-members can hold them to.

[1] The Sociopath Next Door, by Martha Stout Ph.D.
[2] The Doctrine of the Mean

[Mar 20, 2019] I am now of the opinion that 2018 will be the peak in crude oil production, not 2019 as I earlier predicted. Russia is slowing down and may have peaked

If so, economics will suffer and chances for Trump for re-election are much lower, of exist at all due to all his betrayals
In the fable of "The Boy Who Cried Wolf," the wolf actually arrives at the end. Never forget that. Peak oil will arrive. We don't know when, and we are not prepared for it.
Shale play without more borrowed money might be the next Venezuela. .
Mar 16, 2019 | peakoilbarrel.com

I am now of the opinion that 2018 will be the peak in crude oil production, not 2019 as I earlier predicted. Russia is slowing down and may have peaked. Canada is slowing down and Brazil is slowing down. OPEC likely peaked in 2016. It is all up to the USA. Can shale oil save us from peak oil?

OPEC + Russia + Canada, about 57% of world oil production.

Jeff says: 03/14/2019 at 1: 50 pm

"I am now of the opinion that 2018 will be the peak in crude oil production, not 2019 as I earlier predicted. Russia is slowing down and may have peaked. Canada is slowing down and Brazil is slowing down. OPEC likely peaked in 2016. It is all up to the USA. Can shale oil save us from peak oil?"

IEA´s Oil 2019 5y forecast has global conventional oil on a plateau, i.e. declines and growth match each other perfectly and net growth will come from LTO, NGL, biofuels and a small amount of other unconventional and "process gains".

Iran is ofc a jocker, since it can quickly add supply. Will be interesting to see how Trump will proceed.

Carlos Diaz x Ignored says: 03/14/2019 at 3:23 pm

I am quite original in my opinion about Peak Oil. I think it took place in late 2015. I will explain. If we define Peak Oil as the maximum in production over a certain period of time we will not know it has taken place for a long time, until we lose the hope of going above. That is not practical, as it might take years.

I prefer to define Peak Oil as the point in time when vigorous growth in oil production ended and we entered an undulating plateau when periods of slow growth and slow decline will alternate, affected by oil price and variable demand by economy until we reach terminal decline in production permanently abandoning the plateau towards lower oil production.

The 12-year rate of growth in C+C production took a big hit in late 2015 and has not recovered. The increase in 2 Mb since is just an anemic 2.5% over 3 years or 0.8% per year, and it keeps going down. This is plateau behavior since there was no economic crisis to blame. It will become negative when the economy sours.

Peak Oil has already arrived. We are not recognizing it because production still increases a little bit, but we are in Peak Oil mode. Oil production will decrease a lot more easily that it will increase over the next decade. The economy is going to be a real bitch.

Dennis Coyne x Ignored says: 03/14/2019 at 4:57 pm
Carlos Diaz,

Interesting thesis, keep in mind that the price of oil was relatively low from 2015 to 2018 because for much of the period there was an excess of oil stocks built up over the 2013 to 2015 period when output growth outpaced demand growth due to very high oil prices. Supply has been adequate to keep oil prices relatively low through March 2019 and US sanctions on Iran, political instability in Libya and Venezuela, and action by OPEC and several non-OPEC nations to restrict supply have resulted in slower growth in oil output.

Eventually World Petroleum stocks will fall to a level that will drive oil prices higher, there is very poor visibility for World Petroleum Stocks, so there may be a 6 to 12 month lag between petroleum stocks falling to critically low levels and market realization of that fact, by Sept to Dec 2019 this may be apparent and oil prices may spike (perhaps to $90/b by May 2020).

At that point we may start to see some higher investment levels with higher output coming 12 to 60 months later (some projects such as deep water and Arctic projects take a lot of time to become operational, there may be some OPEC projects that might be developed as well, there are also Canadian Oil sands projects that might be developed in a high oil price environment.

I define the peak as the highest 12 month centered average World C+C output, but it can be define many different ways.

Carlos Diaz x Ignored says: 03/14/2019 at 7:18 pm
So Dennis,

Our capability to store oil is very limited considering the volume being moved at any time from production to consumption. I understand that it is the marginal price of the last barrel of oil that sets the price for oil, but given the relatively inexpensive oil between 2015 and now, and the fact that we have not been in an economical crisis, what is according to you the cause that world oil production has grown so anemically these past three years?

Do you think that if oil had been at 20$/b as it used to be for decades the growth in consumption/production would have been significantly higher?

I'll give you a hint, with real negative interest rates and comparatively inexpensive oil most OECD economies are unable to grow robustly.

To me Peak Oil is an economical question, not a geological one. The geology just sets the cost of production (not the price) too high, making the operation uneconomical. It is the economy that becomes unable to pump more oil. That's why the beginning of Peak Oil can be placed at late 2015.

The economic system has three legs, cheap energy, demographic growth, and debt growth. All three are failing simultaneously so we are facing the perfect storm. Social unrest is the most likely consequence almost everywhere.

Dennis Coyne x Ignored says: 03/14/2019 at 9:20 pm
Carlos,

If prices are low that means there is plenty of oil supply relative to demand. It also means that some oil cannot be produced profitably, so oil companies invest less and oil output grows more slowly.

So you seem to have the story backwards. Low oil prices means low growth in supply.

So if oil prices were $20/b, oil supply would grow more slowly, we have had an oversupply of oil that ls what led to low oil prices. When oil prices increase, supply growth will ne higher. Evause profits will be higher and there will be more investment.

Carlos Diaz x Ignored says: 03/15/2019 at 5:03 am
No Dennis,

It is you who has it backwards, as you only see the issue from an oil price point of view, and oil price responds to supply and demand, and higher prices are an estimulus to higher production.

But there is a more important point of view, because oil is one of the main inputs of the economy. If the price of oil is sufficiently low it stimulates the economy. New businesses are created, more people go farther on vacation, and so on, increasing oil demand and oil production. If the price is sufficiently high it depresses the economy. A higher percentage of wealth is transferred from consumer countries to producing countries and consumer countries require more debt. During the 2010-2014 period high oil prices were sustained by the phenomenal push of the Chinese economy, while European and Japanese economies suffered enormously and their oil consumption depressed and hasn't fully recovered since.

In the long term it is the economy that pumps the oil, and that is what you cannot understand.

Oil limits → Oil cost → Oil Price ↔ Economy → Oil demand → Oil production

The economy decides when and how Peak Oil takes place. If you knew that you wouldn't bother with all those models.

And in my opinion the economy already decided in late 2015 when the drive to increase oil production to compensate for low oil prices couldn't be sustained.

Schinzy x Ignored says: 03/15/2019 at 11:18 am
Carlos,

Your reasoning is close to mine. See https://www.tse-fr.eu/publications/oil-cycle-dynamics-and-future-oil-price-scenarios .

Dennis Coyne x Ignored says: 03/15/2019 at 3:01 pm
Carlos,

Both supply and demand matter. I understand economics quite well thank you. You are correct that the economy is very important, it will determine oil prices to some degree especially on the demand side of the market. If one looks at the price of oil and economic growth or GDP, there is very little correlation.

The fact is the World economy grew quite nicely from 2011 to 2014 when oil prices averaged over $100/b.

There may be some point that high oil prices are a problem, apparently $100/b in 2014 US$ is below that price. Perhaps at $150/b your argument would be correct. Why would the economy need more oil when oil prices are low? The low price is a signal that there is too much oil being produced relative to the demand for oil.

I agree the economy will be a major factor in when peak oil occurs, but as most economists understand quite well, it is both supply and demand that will determine market prices for oil.

My models are based on the predictions of the geophysicists at the USGS (estimating TRR for tight oil) and the economists at the EIA (who attempt to predict future oil prices). Both predictions are used as inputs to the model along with past completion rates and well productivity and assumptions about potential future completion rates and future well productivity, bounded by the predictions of both the USGS and the EIA along with economic assumptions about well cost, royalties and taxes, transport costs, discount rate, and lease operating expenses.

Note that my results for economically recoverable resources are in line with the USGS TRR mean estimates and are somewhat lower when the economic assumptions are applied (ERR/TRR is roughly 0.85), the EIA AEO has economically recoverable tight oil resources at about 115% of the USGS mean TRR estimate. The main EIA estimate I use is their AEO reference oil price case (which may be too low with oil prices gradually rising to $110/b (2017$) by 2050.

Assumptions for Permian Basin are royalties and taxes 33% of wellhead revenue, transport cost $5/b, LOE=$2.3/b plus $15000/month, annual discount rate is 10%/year and well cost is $10 million, annual interest rate is 7.4%/year, annual inflation rate assumed to be 2.5%/year, income tax and revenue from natural gas and NGL are ignored all dollar costs in constant 2017 US$.

Mario C Vachon x Ignored says: 03/15/2019 at 6:39 pm
You do incredible work Dennis and I believe you are correct. Demand for oil is relatively inelastic which accounts for huge price swings when inventories get uncomfortably high or low. If supply doesn't keep up with our needs, price will rise to levels that will eventually create more supply and create switching into other energy sources which will reduce demand.
Carlos Diaz x Ignored says: 03/15/2019 at 6:57 pm

Why would the economy need more oil when oil prices are low? The low price is a signal that there is too much oil being produced relative to the demand for oil.

You don't seem to be aware of historical oil prices. For inflation adjusted oil prices since 1946 oil (WTI) spent:
27 years below $30
13 years at ~ $70
18 years at ~ $40
10 years at ~ $90
5 years at ~ $50
https://www.macrotrends.net/1369/crude-oil-price-history-chart
And the fastest growth in oil production took place precisely at the periods when oil was cheapest.

You simply cannot be more wrong about that.

And your models are based on a very big assumption, that the geology of the reserves is determinant for Peak Oil. It is not. There is plenty of oil in the world, but the extraction of most of it is unaffordable. The economy will decide (has decided) when Oil Peak takes place and what happens afterwards. Predictions/projections aren't worth a cent as usual. You could save yourself the trouble.

Dennis Coyne x Ignored says: 03/16/2019 at 7:33 am
Carlos,

I use both geophysics and economics, it is not one or the other it is both of these that will determine peak oil.

Of course oil prices have increased, the cheapest oil gets produced first and oil gradually gets more expensive as the marginal barrel produced to meet demand at the margin is more costly to produce.

Real Oil Prices do not correlate well with real economic growth and on a microeconomic level the price of oil will affect profits and willingness of oil companies to invest which in turn will affect future output. Demand will be a function of both economic output and efficiency improvements in the use of oil.

Dennis Coyne x Ignored says: 03/16/2019 at 7:34 am
Thanks Mario.
Dennis Coyne x Ignored says: 03/16/2019 at 10:49 am
Carlos,

Also keep in mind that during the 1945-1975 period economic growth rates were very high as population growth rates were very high and the World economy was expanding rapidly as population grew and the World rebuilt in the aftermath of World War 2. Oil was indeed plentiful and cheap over this period and output grew rapidly to meet expanding World demand for oil. The cheapness of the oil led to relatively inefficient use of the resource, as constraints in output became evident and more expensive offshore, Arctic oil were extracted oil prices increased and there was high volatility due to Wars in the Middle east and other political developments. Oil output (C+C) since 1982 has grown fairly steadily at about an 800 kb/d annual average each year, oil prices move up and down in response to anticipated oil stock movements and are volatile because these estimates are often incorrect (the World petroleum stock numbers are far from transparent.)

On average since the Iran/Iraq crash in output (1982-2017) World output has grown by about 1.2% per year and 800 kb/d per year on average, prices have risen or fallen when there was inadequate or excess stocks of petroleum, this pattern (prices adjusting to stock levels) is likely to continue.

There has been little change when we compare 1982 to 1999 to 1999-2017 (divide overall period of interest in half) for either percentage increase of absolute increase in output.

I would agree that severe shortages of oil supply relative to demand (likely apparent by 2030) is likely to lead to an economic crisis as oil prices rise to levels that the World economy cannot adjust to (my guess is that this level will be $165/b in 2018$). Potentially high oil prices might lead to faster adoption of alternative modes of transport that might avert a crisis, but that is too optimistic a scenario even for me. 🙂

HHH x Ignored says: 03/15/2019 at 9:44 pm
China will be in outright deflation soon enough. Economic stimulus is starting to fail in China. They can't fill the so called bathtub up fast enough to keep pace with the water draining out the bottom. So to speak.

Interest rates in China will soon be exactly where they are in Europe and Japan. Maybe lower.

In order to get oil to $90-$100 the value of the dollar is going to have to sink a little bit. In order to get oil to $140-$160 the dollar has to make a new all time low. Anybody predicting prices shooting up to $200 needs the dollar index to sink to 60 or below.

The reality is oil is going to $20. Because the rest of the world outside the US is failing. Dennis makes some nice graphs and charts and under his assumptions his charts and graphs are correct. But his assumptions aren't correct.

We got $20 oil and an economic depression coming.

Peak Oil is going to be deflationary as hell. Higher prices aren't in the cards even when a shortage actually shows up. We will get less supply at a lower price. Demand destruction is actually going to happen when economies and debt bubbles implode so we actually can't be totally sure we are ever going to see an actual shortage.

We could very well be producing 20-30% less oil than we do now and still not have a shortage.

Oh and EV's are going to have to compete with $20 oil not $150 oil.

Lightsout x Ignored says: 03/16/2019 at 6:25 am
You are assuming that the oil is priced in dollars there are moves underway that raise two fingers to that.

https://www.scmp.com/economy/china-economy/article/2174453/china-and-russia-look-ditch-dollar-new-payments-system-move

Dennis Coyne x Ignored says: 03/16/2019 at 7:41 am
HHH,

When do you expect the oil price to reach $20/b? We will have to see when this occurs.

It may come true when EVs and AVs have decimated demand for oil in 2050, but not before. EIA's oil price reference scenario from AEO 2019 below. That is a far more realistic prediction (though likely too low especially when peak oil arrives in 2025), oil prices from $100 to $160/b in 2018 US$ are more likely from 2023 to 2035 (for three year centered average Brent oil price).

Dennis Coyne x Ignored says: 03/16/2019 at 9:56 am
HHH,

My assumptions are based on USGS mean resource estimates and EIA oil price estimates, as well as BIS estimates for the World monetary and financial system.

Your assumption that oil prices are determined by exchange rates only is not borne out by historical evidence. Exchange rates are a minor, not a major determinant of oil prices.

HHH x Ignored says: 03/16/2019 at 6:50 pm
Dennis,

Technically speaking. The most relevant trendline on price chart currently comes off the lows of 2016/02/08. It intersects with 2017/06/19. You draw the trendline on out to where price is currently. Currently price is trying to backtest that trendline.

On a weekly price chart i'd say it touches the underside of that trendline sometime in April in the low 60's somewhere between $62-$66 kinda depends on when it arrives there time wise. The later it takes to arrive there the higher price will be. I've been trading well over 20 years can't tell you how many times i've seen price backtest a trendline after it's been broken. It's a very common occurrence. And i wouldn't short oil until after it does.

But back to your question. $20 oil what kind of timetable. My best guess is 2021-2022. Might happen 2020 or 2023. And FED can always step in and weaken the dollar. Fundamentally the only way oil doesn't sink to $20 is the FED finds a way to weaken the dollar.

But understand the FED is the only major CB that currently doesn't have the need to open up monetary policy. It's really the rest of the worlds CB ultra loose monetary policy which is going to drive oil to $20.

[Mar 20, 2019] What will happen if no energy source can cover the decline rate

Notable quotes:
"... "If that was to happen and no energy source can cover the decline rate, wouldn't the world be pretty fucked economically thereafter? Hence one can assume or take a wild ass guess that the decline after peak would resemble something like Venezuela. So not a smooth short % decline rate." ..."
"... Realistically the global economy is already in a tight spot. It started back in 2000 when Oil prices started climbing from about $10/bbl in 1998 to about $30/bbl in 2000. Then the World Major Central banks dropped interest which ended triggering the Housing Boom\Bust and carried Oil prices to $147/bbl. Since then Interest rates have remained extremely low while World Debt has soared (expected to top $250T in 2019). ..."
"... Probably the biggest concern for me is the risking risks for another World war: The US has been targeting all of the major Oil exporters. The two remaining independent targets are Venezuela & Iran. I suspect Venzuela will be the next US take over since it will be a push over compared to Iran. ..."
Mar 16, 2019 | peakoilbarrel.com

Ignored says: 03/16/2019 at 12:42 am

Iron Mike Asked:

"If that was to happen and no energy source can cover the decline rate, wouldn't the world be pretty fucked economically thereafter? Hence one can assume or take a wild ass guess that the decline after peak would resemble something like Venezuela. So not a smooth short % decline rate."

Energy is the economy, The economy cannot function without energy. Thus its logical that a decline in energy supply will reduce the economy. The only way for this not to apply is if there are efficiency gains that offset the decline. But at this point the majority of cost effective efficiency gains are already in place. At this point gains become increasing expensive with much smaller gains (law of diminishing returns). Major infrastructure changes like modernizing rail lines take many decades to implement and also require lots of capital. Real capital needed will be difficult to obtain do to population demographics (ie boomers dependent on massive unfunded entitlement & pensions).

Realistically the global economy is already in a tight spot. It started back in 2000 when Oil prices started climbing from about $10/bbl in 1998 to about $30/bbl in 2000. Then the World Major Central banks dropped interest which ended triggering the Housing Boom\Bust and carried Oil prices to $147/bbl. Since then Interest rates have remained extremely low while World Debt has soared (expected to top $250T in 2019).

My guess is that global economy will wipe saw in the future as demographics, resource depletion (including Oil) and Debt all merge into another crisis. Gov't will act with more cheap and easy credit (since there is no alterative TINA) as well as QE\Asset buying to avoid a global depression. This creating a wipesaw effect that has already been happening since 2000 with Boom Bust cycles. This current cycle has lasted longer because the Major central banks kept interest rates low, When The Fed started QT and raising rate it ended up triggering a major stock market correction In Dec 2018. I believe at this point the Fed will no longer seek any further credit tightening that will trip the economy back into recession. However its likely they the global economy will fall into another recession as consumers & business even without further credit tighting by CB (Central Banks) Because they've been loading up on cheap debt, which will eventually run into issues servicing their debt. For instance there are about 7M auto loans in delinquency in March of 2019. Stock valuations are largely driven by stock buybacks, which is funded by debt. I presume companies are close to debt limit which is likely going to prevent them from purchase more stock back.

Probably the biggest concern for me is the risking risks for another World war: The US has been targeting all of the major Oil exporters. The two remaining independent targets are Venezuela & Iran. I suspect Venzuela will be the next US take over since it will be a push over compared to Iran. I think once all of remaining independent Oil Exports are seized that is when the major powers start fighting each other. However is possible that some of the proxy nations (Pakastan\India),(Israel\Iran), etc trigger direct war between the US, China, and Russia at any time.

Notice that the US is now withdrawing from all its major arms treaties, and the US\China\Russia are now locked into a Arms race. Nuclear powers are now rebuilding their nuclear capacity (more Nukes) and modernizing their deployment systems (Hypersonic, Very large MIRV ICBMS, Undersea drones, Subs, Bombers, etc.

My guess is that nations like the US & China will duke it out before collapsing into the next Venezuela. If my assessment is correct, The current state of Venezuela will look like the garden of Eden compared to the aftermath of a full scale nuclear war.

Currently the Doomsday clock (2019) is tied with 1953 at 2 minutes:

https://thebulletin.org/doomsday-clock/past-announcements/

1953 was the height of the cold war. I presume soon the Doomsday clock will be reduced to less than 2 Minutes later this year, due to recent events in the past few weeks.

https://thebulletin.org/doomsday-clock/current-time/

"the world's nuclear nations proceeded with programs of "nuclear modernization" that are all but indistinguishable from a worldwide arms race, and the military doctrines of Russia and the United States have increasingly eroded the long-held taboo against the use of nuclear weapons."

" The current international security situation -- what we call the "new abnormal" -- has extended over two years now. It's a state as worrisome as the most dangerous times of the Cold War, a state that features an unpredictable and shifting landscape of simmering disputes that multiply the chances for major military conflict to erupt."

[Mar 20, 2019] The sex slave scandal that exposed pedophile billionaire Jeffrey Epstein by Maureen Callahan

Notable quotes:
"... Another house manager, Alfredo Rodriguez, told Recarey that very young girls were giving Epstein massages at least twice a day, and in one instance, Epstein had Rodriguez deliver one dozen roses to Mary, at her high school. ..."
"... Palm Beach prosecutors said the evidence was weak, and after presenting the case to a grand jury, Epstein was charged with only one count of felony solicitation of prostitution. In 2008, he pleaded guilty and nominally served 13 months of an 18-month sentence in a county jail: Epstein spent one day a week there, the other six out on "work release." ..."
"... Today, Jeffrey Epstein is a free man, albeit one who routinely settles civil lawsuits against him, brought by young women, out of court. As of 2015, Epstein had settled multiple such cases. ..."
Oct 09, 2016 | nypost.com
Judge gives deadline for arguments relating to unsealing Jeffrey Epstein documents Documents related to pedophile Jeffrey Epstein may be unsealed Pedophile Jeffrey Epstein's deal with feds was illegal: judge Northam has only himself to blame In 2005, the world was introduced to reclusive billionaire Jeffrey Epstein, friend to princes and an American president, a power broker with the darkest of secrets: He was also a pedophile, accused of recruiting dozens of underage girls into a sex-slave network, buying their silence and moving along, although he has been convicted of only one count of soliciting prostitution from a minor. Visitors to his private Caribbean island, known as "Orgy Island," have included Bill Clinton, Prince Andrew and Stephen Hawking.

According to a 2011 court filing by alleged Epstein victim Virginia Roberts Giuffre, she saw Clinton and Prince Andrew on the island but never saw the former president do anything improper. Giuffre has accused Prince Andrew of having sex with her when she was a minor, a charge Buckingham Palace denies.

"Epstein lives less than one mile away from me in Palm Beach," author James Patterson tells The Post. In the 11 years since Epstein was investigated and charged by the Palm Beach police department, ultimately copping a plea and serving 13 months on one charge of soliciting prostitution from a 14-year-old girl, Patterson has remained obsessed with the case.

"He's a fascinating character to read about," Patterson says. "What is he thinking? Who is he?"

Patterson's new book, "Filthy Rich: A Powerful Billionaire, the Sex Scandal That Undid Him, and All the Justice That Money Can Buy," is an attempt to answer such questions. Co-authored with John Connolly and Tim Malloy, the book contains detailed police interviews with girls who alleged sexual abuse by Epstein and others in his circle. Giuffre alleged that Epstein's ex-girlfriend Ghislaine Maxwell, daughter of the late media tycoon Robert Maxwell, abused her. Ghislaine Maxwell has denied allegations of enabling abuse.

Epstein has spent the bulk of his adult life cultivating relationships with the world's most powerful men. Flight logs show that from 2001 to 2003, Bill Clinton flew on Epstein's private plane, dubbed "The Lolita Express" by the press, 26 times. After Epstein's arrest in July 2006, federal tax records show Epstein donated $25,000 to the Clinton Foundation that year.

Bill Clinton in 1994. AP

Epstein was also a regular visitor to Donald Trump's Mar-a-Lago, and the two were friends. According to the Daily Mail, Trump was a frequent dinner guest at Epstein's home, which was often full of barely dressed models. In 2003, New York magazine reported that Trump also attended a dinner party at Epstein's honoring Bill Clinton.

Last year, The Guardian reported that Epstein's "little black book" contained contact numbers for A-listers including Tony Blair, Naomi Campbell, Dustin Hoffman, Michael Bloomberg and Richard Branson.

In a 2006 court filing, Palm Beach police noted that a search of Epstein's home uncovered two hidden cameras. The Mirror reported that in 2015, a 6-year-old civil lawsuit filed by "Jane Doe No. 3," believed to be the now-married Giuffre, alleged that Epstein wired his mansion with hidden cameras, secretly recording orgies involving his prominent friends and underage girls. The ultimate purpose: blackmail, according to court papers.

Britain's Prince Andrew in 2012 AP

"Jane Doe No. 3" also alleged that she had been forced to have sex with "numerous prominent American politicians, powerful business executives, a well-known prime minister, and other world leaders."

"We uncovered a lot of details about the police investigation and a lot about the girls, what happened to them, the effect on their lives," Patterson says.

"The reader has to ask: Was justice done here or not?"

Epstein, now 63, has always been something of an international man of mystery. Born in Brooklyn, he had a middle-class upbringing: His father worked for the Parks Department, and his parents stressed hard work and education.

'We uncovered a lot of details about the police investigation and a lot about the girls, what happened to them, the effect on their lives.'

- James Patterson

Epstein was brilliant, skipping two grades and graduating Lafayette High School in 1969. He attended Cooper Union but dropped out in 1971 and by 1973 was teaching calculus and physics at Dalton, where he tutored the son of a Bear Stearns exec. Soon, Epstein applied his facility with numbers on Wall Street but left Bear Stearns under a cloud in 1981. He formed his own business, J. Epstein & Co.

The bar for entry at the new firm was high. According to a 2002 profile in New York magazine, Epstein only took on clients who turned over $1 billion, at minimum, for him to manage. Clients also had to pay a flat fee and sign power of attorney over to Epstein, allowing him to do whatever he saw fit with their money.

Still, no one knew exactly what Epstein did, or how he was able to amass a personal billion-dollar-plus fortune. In addition to a block-long, nine-story mansion on Manhattan's Upper East Side, Epstein owns the $6.8 million mansion in Palm Beach, an $18 million property in New Mexico, the 70-acre private Caribbean island, a helicopter, a Gulfstream IV and a Boeing 727.

"My belief is that Jeff maintains some sort of money-management firm, though you won't get a straight answer from him," one high-level investor told New York magazine. "He once told me he had 300 people working for him, and I've also heard that he manages Rockefeller money. But one never knows. It's like looking at the Wizard of Oz -- there may be less there than meets the eye."

Jeffrey Epstein's Palm Beach home Splash News

"He's very enigmatic," Rosa Monckton told Vanity Fair in 2003. Monckton was the former British CEO of Tiffany & Co. and confidante to the late Princess Diana. She was also a close friend of Epstein's since the 1980s. "He never reveals his hand . . . He's a classic iceberg. What you see is not what you get."

Both profiles intimated that Epstein had a predilection for young women but never went further. In the New York magazine piece, Trump said Epstein's self-professed image as a loner, an egghead and a teetotaler was not wholly accurate.

Donald Trump in 1990 AP

"I've known Jeff for 15 years," Trump said. "Terrific guy. He's a lot of fun to be with. It is even said that he likes beautiful women as much as I do, and many of them are on the younger side. No doubt about it -- Jeffrey enjoys his social life."

Three years after that profile ran, Palm Beach Police Officer Michele Pagan got a disturbing message. A woman reported that her 14-year-old stepdaughter confided to a friend that she'd had sex with an older man for money. The man's name was Jeff, and he lived in a mansion on a cul-de-sac.

Pagan persuaded the woman to bring her stepdaughter down to be interviewed. In his book, Patterson calls the girl Mary. And Mary, like so many of the other girls who eventually talked, came from the little-known working-class areas surrounding Palm Beach.

A friend of a friend, Mary said, told her she could make hundreds of dollars in one hour, just for massaging some middle-aged guy's feet. Lots of other girls had been doing it, some three times a week.

Mary claimed she had been driven to the mansion on El Brillo Way, where a female staffer escorted her up a pink-carpeted staircase, then into a room with a massage table, an armoire topped with sex toys and a photo of a little girl pulling her underwear off.

Ghislaine Maxwell Getty Images

Epstein entered the room, wearing only a towel, Mary said.

"He took off the towel," Mary told Pagan. "He was a really built guy. But his wee-wee was very tiny."

Mary said Epstein got on the table and barked orders at her. She told police she was alone in the room with him, terrified.

Pagan wrote the following in her incident report:

"She removed her pants, leaving her thong panties on. She straddled his back, whereby her exposed buttocks were touching Epstein's exposed buttocks. Epstein then turned to his side and started to rub his penis in an up-and-down motion. Epstein pulled out a purple vibrator and began to massage Mary's vaginal area."

Palm Beach assigned six more detectives to the investigation. They conducted a "trash pull" of Epstein's garbage, sifting through paper with phone numbers, used condoms, toothbrushes, worn underwear. In one pull, police found a piece of paper with Mary's phone number on it, along with the number of the person who recruited her.

On Sept. 11, 2005, detectives got another break. Alison, as she's called in the book, told Detective Joe Recarey that she had been going to Epstein's house since she was 16. Alison had been working at the Wellington Green Mall, saving up for a trip to Maine, when a friend told her, "You can get a plane ticket in two hours . . . We can go give this guy a massage and he'll pay $200," according to her statement to the police.

Alison told Recarey that she visited Epstein hundreds of times. She said he had bought her a new 2005 Dodge Neon, plane tickets, and gave her spending money. Alison said he even asked her to emancipate from her parents so she could live with him full-time as his "sex slave."

She said Epstein slowly escalated his sexual requests, and despite Alison's insistence that they never have intercourse, alleged, "This one time . . . he bent me over the table and put himself in me. Without my permission."

Alison then asked if what Epstein had done to her was rape and spoke of her abject fear of him.

An abridged version of her witness statement, as recounted in the book:

Alison : Before I say anything else . . . um, is there a possibility that I'm gonna have to go to court or anything?
Recarey : I mean, what he did to you is a crime. I'm not gonna lie to you.
Alison : Would you consider it rape, what he did?
Recarey : If he put himself inside you without permission . . . That, that is a crime. That is a crime.
Alison : I don't want my family to find out about this . . . 'Cause Jeffrey's gonna get me. You guys realize that, right? . . . I'm not safe now. I'm not safe.
Recarey : Why do you say you're not safe? Has he said he's hurt people before?
Alison : Well, I've heard him make threats to people on the telephone, yeah. Of course.
Recarey : You're gonna die? You're gonna break your legs? Or  --
Alison : All of the above!

Alison also told Recarey that Epstein got so violent with her that he ripped out her hair and threw her around. "I mean," she said, "there's been nights that I walked out of there barely able to walk, um, from him being so rough."

Two months later, Recarey interviewed Epstein's former house manager of 11 years, documented in his probable-cause affidavit as Mr. Alessi. "Alessi stated Epstein receives three massages a day . . . towards the end of his employment, the masseuses . . . appeared to be 16 or 17 years of age at the most . . . [Alessi] would have to wash off a massager/vibrator and a long rubber penis, which were in the sink after the massage."

Another house manager, Alfredo Rodriguez, told Recarey that very young girls were giving Epstein massages at least twice a day, and in one instance, Epstein had Rodriguez deliver one dozen roses to Mary, at her high school.

In May 2006, the Palm Beach Police Department filed a probable-cause affidavit, asking prosecutors to charge Epstein with four counts of unlawful sexual activity with a minor -- a second-degree felony -- and one count of lewd and lascivious molestation of a 14-year-old minor, also a second-degree felony.

Today, Jeffrey Epstein is a free man, albeit one who routinely settles civil lawsuits against him, brought by young women, out of court.

Palm Beach prosecutors said the evidence was weak, and after presenting the case to a grand jury, Epstein was charged with only one count of felony solicitation of prostitution. In 2008, he pleaded guilty and nominally served 13 months of an 18-month sentence in a county jail: Epstein spent one day a week there, the other six out on "work release."

Today, Jeffrey Epstein is a free man, albeit one who routinely settles civil lawsuits against him, brought by young women, out of court. As of 2015, Epstein had settled multiple such cases.

Giuffre has sued Ghislaine Maxwell in Manhattan federal court, charging defamation -- saying Maxwell stated Giuffre lied about Maxwell's recruitment of her and other underage girls. Epstein has been called upon to testify in court this month, on Oct. 20.

The true number of Epstein's victims may never be known.

He will be a registered sex offender for the rest of his life, not that it fazes him. "I'm not a sexual predator, I'm an 'offender,' " Epstein told The Post in 2011. "It's the difference between a murderer and a person who steals a bagel."

[Mar 20, 2019] Donald Trump may or may not suffer from sleep deprivation. He definitely suffers from something called NPD, Narcissistic Personality Disorder.

NYT is pro-Hillary neocon establishment influenced rag. One apt observation from NYT comments: "Trump's assertions about sleep should be taken with the grain of salt that all his other grandiose proclamations deserve. I suspect he makes those claims just to prove what an exceptional human he is. He doesn't even need to sleep much!"
Trumps come and go, but the deluded, totally brainwashed electorate will stay. That's the real problem. Degradation of democracy into oligarchy (the iron law of oligarchy) is an objective process. Currently what we see is some kind revolt against status quo. that's why Trump and Sanders get so many supporters.
Another one from comments: "Over the years, Pew surveys show that at least 60% of those polled can't name two branches of the government. Current campaigns, including that of Sanders, imply that the POTUS has a wide range of powers that are to be found nowhere in the Constitution." So none of Repug candidates understand this document. And still I must admit that "Trump is the best in breed when it comes to this GOP dog show." I agree that "Trump punches above his weight in debates "
NYT will never tell you why Hillary will be even more dangerous president.
Only a sleep disorder physician following a full-night study could tell us whether the diagnosis is clinically sound. This guy from NYT is a regular uneducated journo, not a certified physician. Why insult people who truly suffer from sleep deprivation? So all of them are obnoxious maniacs? To me a large part of his behavior is a typical alpha-male behavior. There are, in fact, a number of brilliant, driven alpha-males who function well with a bare amount of sleep. That may be an evolutionary trait that help them to achieve dominance. For example, Napoleon rarely slept more than 2-3 hours per 24-hour period, according to several historians. Churchill stayed up several nights in a row reading Hansard in his formative years and he was a gifted orator, one of the sharpest wits. He also was an alcoholic. Several famous famous mathematicians were among sleep deprived people. Like photographic memory this is a unique idiosyncrasy that is more frequent in alpha-males, not necessary a disease. BTW Angela Merkel is noted for her ability not to sleep for several nights, wearing her opponents into shreds via sleep deprivation and enforcing her decisions over the rest. That was last demonstrated in Minsk were she managed even to get Putin to agree on her terms.
He mentions this term "alpha male" despite the fact that it provides an alternative explanation. Also as one reader commented "So please explain the positions (and behaviors ) of Ayatollah Cruz and rubber man Rubio." Those two backstabbing pseudo-religious demagog got implicit support from the article.
How about this from sleep deprived person vs one definitely non-sleep deprive person (Jeb!): "Donald Trump joins the fight to release the secret 28 Pages of the 9/11 Report."
Notable quotes:
"... This is Tim's contribution to the growing movement to discredit Trump. Every candidate can be similarly eviscerated for their weaknesses, including character flaws. The problem is that our American system of electing leadership is deeply flawed and easily manipulated by advertising. The humiliating process of campaigning drives away our best prospects, leaving the country with weak, inconsistent leadership. ..."
"... gemli, Mr. Obama and Mrs. Clinton pursued a regime change in Libya, Syria and Ukraine. They got away with their foolish adventure by saying that Gaddafi was a bad guy, Assad is a bad guy and Putin is a bad guy. ..."
"... Mr. Trump is the sole American politician who is willing to say that we should cooperate with Putin. He is the only Republican to be open to single payer health care, the only Republican to say something good about Planned Parenthood and the only Republican to say that Bush should have been impeached for the Iraq war. ..."
"... Hillary Rodham and Marco Rubio are so awful that we would be better off with a nasty, sleep-deprived Trump. Besides, there is still a much better alternative: the irascible Bernie Sanders. He may be angry, but you would have to be crazy to not be angry with the mess we now have to live with: a rigged economy, "free trade", politics corrupted by money, and an insatiable Military Industrial Complex. ..."
"... A lot of people are angry and Trump is channeling that anger. Sanders is channeling a different anger but he is too nice, and will lose to Mrs. Clinton who is supported by the establishment. ..."
"... He, I believe is also the first American politician to say openly that we have to cooperate with Russia if we are really serious about taking on ISIS. Mr. Obama, with his Harvard education, has NO idea what to do about the ME and is floundering around. Meanwhile Russia and Assad and the Kurds are taking the lead, and our "allies" Turkey and Saudi Arabia are actually undermining the war against ISIS. ..."
"... I would not vote for Trump but if he does become president, we might actually have peace in the Middle East and we might actually have single payer health care. On the second, almost all the Democrats will support him and so will at least some Republicans. ..."
"... Trump is not a nice man but he might not be a disaster as president. ..."
"... Mr. Egan, Donald Trump may or may not suffer from sleep deprivation. He definitely suffers from something called NPD, Narcissistic Personality Disorder. He has the classic symptoms which are described as follows, according to the Mayo Clinic ..."
"... Trump is right about one thing, He does make your head spin. ..."
"... I just finished reading 4 opinion columns by Bruni, Brooks, Krugman and lastly Tim Egan's, all published on Feb 26th. (May the last be first and the first last.) I hope Kasich wins to invoke a civil exchange of ideas in American politics, but I will vote for Bernie ..."
"... I imagine the Asians and/or Europe all laughing at us now, but at least the're not shouting and acting like children. Help me, I'm drowning. Give me a leader who can compromise in that great noble tradition which benefits everyone. It's called compassion for the global family. ..."
"... Ambler in "Background to Danger" has a small meditation about politics being not much of anything other than a face behind which the true story goes on, one of big business interests--or in general, economic interests. ..."
"... With Donald Trump the Republican party in the U.S. seems to have dropped the politics mask -- you have a combination of business and fascistic impulses. The question however, is why. Could it be because now all nations in the world find themselves hemmed, with a landlocked feeling like Germany had prior to outbreak of WW2? These business/authoritarian impulses today are not confined to the U.S. alone. ..."
"... how to satisfy in simple basics the restless masses of millions upon millions of people, everything else, not to mention culture, just collapsing in a crowd discussion of who gets what, when, where, why, and how. ..."
"... What's defective about Trump? He is obviously doing very well for himself - he is the likely Republican nominee and is not exactly starving despite multiple bankruptcies. ..."
"... There are real problems with politics in the US and Trump is getting support partly because he at least shows some signs, however delusionary, of addressing the concerns of the 99%. ..."
"... Why are Democrats so concerned that Donald Trump might be the Republican Party's nominee for President that the NY Times trots out editorials psychobabbling about his sleep deprivation? ..."
"... Trump may be all that the intellectual elite deride him for. Guess what? The people who support him don't care. They are tired of being told how to think by people who suppose themselves to be their betters. They will cast their votes and throw their support behind whomever they please, thank-you very much. ..."
"... And really, does Timothy Egan really believe Donald Trump doesn't know what he's doing or saying? Because of sleep deprivation? Note to Mr. Egan: Whatever is Trump's sleep schedule, it seems to be working well for him. He's winning. ..."
"... Trump functions well enough to understand this: (1) The media is deceptive with an agenda of its own. (2) Big donors and big money control the career politicians. 93) Politicians can talk talk talk and make plans and policy and get nothing done. ..."
"... Trump and his supporters are on to all this now. The corrupt media, the corrupt big money and the all talk no action politicians. That is functioning well enough. Trump does not need to function beyond that. His supporters know it and he knows it. ..."
"... So far the best and the brightest highly educated intellectuals have let the USA down . Trump has a certain kind of intelligence that might be just what we need. He effectively cut through a crowded Republican field packed with ideological purists like a knife through butter. He is a very talented New Yorker who grew up in the 60s and went to Fordham before he went to Wharton. If you want to stick your finger in the collective eye of the "elite". vote for Trump. ..."
"... The republican party is the reactionary party. They are a little like the Sicilians described in the novel "The Leopard" where it is said that" In Sicily it doesn't matter whether things are done well or done badly; the sin which we Sicilians never forgive is simply that of 'doing' at all." ..."
"... The Taibbi piece can be found here at this link: http://www.rollingstone.com/politics/news/how-america-made-donald-trump-... ..."
"... Better a sleep deprived bully than a well rested one, which what the rest of the bunch are. They clearly know exactly how to ruin the country and antagonize our allies. ..."
"... As you are reading this, recall how a stressful event in your own life interfered with your sleep. Well, given the frantic nature of the current Republican primary season, the travel, the debates, the probing press, the TV interviews, the speeches, the insults and what's at stake, all of the candidates must be sleep deprived. If they were not they wouldn't be human. Donald will do just fine once he becomes president and gets use to the job (or not). ..."
"... But what about those who hold those same obnoxious ideas arguably sans sleep deprivation? Palin, Cruz, Carson? Please do a series of columns linking the apparent absence of reason in many of the GOP candidates with the current DSM. ..."
"... I used to ridicule President Reagan's legendary afternoon naps. Now I am the age Reagan was as president, and I don't think I could function without napping when I don't get enough sleep at night. ..."
"... What is happening now is not about Trump. It's about what he represents. I don't normally read Peggy Noonan but she nails it today. "There are the protected and the unprotected. The protected make public policy. The unprotected live in it. The unprotected are starting to push back, powerfully. ..."
Feb 26, 2016 | The New York Times
michael kittle
vaison la romaine, france 17 hours ago

This is Tim's contribution to the growing movement to discredit Trump. Every candidate can be similarly eviscerated for their weaknesses, including character flaws. The problem is that our American system of electing leadership is deeply flawed and easily manipulated by advertising. The humiliating process of campaigning drives away our best prospects, leaving the country with weak, inconsistent leadership.

The founding fathers rejected a parliamentary system because it was like England's, but history indicates America could have avoided many political debacles if it had been easier to remove incompetent presidents when their decisions threatened the country. Modernizing our electoral system, shortening the campaign time, and raising the level of debate could improve the choices Americans are given.

Rohit
New York 8 hours ago

gemli, Mr. Obama and Mrs. Clinton pursued a regime change in Libya, Syria and Ukraine. They got away with their foolish adventure by saying that Gaddafi was a bad guy, Assad is a bad guy and Putin is a bad guy.

And maybe they are right about these people being bad guys. But the regime change policy has been a disaster. WE did not spend a trillion dollars and no AMERICAN troops died. But hundreds of thousands of Syrians are dead, millions knocking at Germany's door and Greece is overwhelmed with refugees. This was all the doing of the "Obama team".

Mr. Trump is the sole American politician who is willing to say that we should cooperate with Putin. He is the only Republican to be open to single payer health care, the only Republican to say something good about Planned Parenthood and the only Republican to say that Bush should have been impeached for the Iraq war.

YOU just see a nasty man in the Republican debates who talks nonsense and has no trouble lying. And that nasty mean does seem to be there, although given Trump, the nasty man might well be a façade who will vanish as soon as he faces the general election.

And you need to be aware of the fact that some of his positions are actually sensible and he is the only politician who has all these positions.

Unfortunately you guys hate Republicans so much that you see red any time you see one and that red in your eyes prevents you from seeing clearly.

Timothy Bal

Central Jersey 16 hours ago
A sleep-deprived Trump is still much better than a fully rested tool of the elites from either political party.

Hillary Rodham and Marco Rubio are so awful that we would be better off with a nasty, sleep-deprived Trump. Besides, there is still a much better alternative: the irascible Bernie Sanders. He may be angry, but you would have to be crazy to not be angry with the mess we now have to live with: a rigged economy, "free trade", politics corrupted by money, and an insatiable Military Industrial Complex.

Rohit, New York 9 hours ago
A lot of people are angry and Trump is channeling that anger. Sanders is channeling a different anger but he is too nice, and will lose to Mrs. Clinton who is supported by the establishment.

Trump is mean enough to take on the establishment, and win. And he is the first Republican brave enough to say that Planned Parenthood DOES do some good work. Like him, I do NOT think they should receive federal funding but that some or most of their work is actually health related is a fact.

He, I believe is also the first American politician to say openly that we have to cooperate with Russia if we are really serious about taking on ISIS. Mr. Obama, with his Harvard education, has NO idea what to do about the ME and is floundering around. Meanwhile Russia and Assad and the Kurds are taking the lead, and our "allies" Turkey and Saudi Arabia are actually undermining the war against ISIS.

I would not vote for Trump but if he does become president, we might actually have peace in the Middle East and we might actually have single payer health care. On the second, almost all the Democrats will support him and so will at least some Republicans.

Trump is not a nice man but he might not be a disaster as president.

Bob SE PA 6 hours ago

Mr. Egan, Donald Trump may or may not suffer from sleep deprivation. He definitely suffers from something called NPD, Narcissistic Personality Disorder. He has the classic symptoms which are described as follows, according to the Mayo Clinic http://www.mayoclinic.org/diseases-conditions/narcissistic-personality-d... :

"DSM-5 criteria for narcissistic personality disorder include these features:

  1. Having an exaggerated sense of self-importance
  2. Expecting to be recognized as superior even without achievements that warrant it
  3. Exaggerating your achievements and talents
  4. Being preoccupied with fantasies about success, power, brilliance, beauty or the perfect mate
  5. Believing that you are superior and can only be understood by or associate with equally special people
  6. Requiring constant admiration
  7. Having a sense of entitlement
  8. Expecting special favors and unquestioning compliance with your expectations
  9. Taking advantage of others to get what you want
  10. Having an inability or unwillingness to recognize the needs and feelings of others
  11. Being envious of others and believing others envy you
  12. Behaving in an arrogant or haughty manner"

bill b new york 16 hours ago

Trump is right about one thing, He does make your head spin.

Paul Greensboro, NC 11 hours ago

I just finished reading 4 opinion columns by Bruni, Brooks, Krugman and lastly Tim Egan's, all published on Feb 26th. (May the last be first and the first last.) I hope Kasich wins to invoke a civil exchange of ideas in American politics, but I will vote for Bernie or Hilary assuming an asteroid does not hit the earth before then.

I imagine the Asians and/or Europe all laughing at us now, but at least the're not shouting and acting like children. Help me, I'm drowning. Give me a leader who can compromise in that great noble tradition which benefits everyone. It's called compassion for the global family.

Daniel12 Wash. D.C. 14 hours ago

Donald Trump?

I'm on a project to read four (the four I could find so far) of the six Eric Ambler novels written prior to WW2. I'm on the second, "Background to Danger", now. Ambler in "Background to Danger" has a small meditation about politics being not much of anything other than a face behind which the true story goes on, one of big business interests--or in general, economic interests.

With Donald Trump the Republican party in the U.S. seems to have dropped the politics mask -- you have a combination of business and fascistic impulses. The question however, is why. Could it be because now all nations in the world find themselves hemmed, with a landlocked feeling like Germany had prior to outbreak of WW2? These business/authoritarian impulses today are not confined to the U.S. alone.

Worse, the opposition to big business, the other big economic theory of past decades, the socialistic/communistic trend, has been seen in practice whether we speak of Cuba or the Soviet Union or Venezuela or China. It seems all the masks of politics are coming off, all the ideals such as democracy, rights, communism, what have you and instead the argument is turning to actual and naked discussion of interests pure and simple, right and left wing economics, how to satisfy in simple basics the restless masses of millions upon millions of people, everything else, not to mention culture, just collapsing in a crowd discussion of who gets what, when, where, why, and how.

The open boat.

skeptonomist is a trusted commenter Tennessee 11 hours ago

What's defective about Trump? He is obviously doing very well for himself - he is the likely Republican nominee and is not exactly starving despite multiple bankruptcies.

What needs analysis is why so many people support Trump - what's up with them? And what defects in the establishments of both parties cause so many people to reject their selected dynastic picks.

There are real problems with politics in the US and Trump is getting support partly because he at least shows some signs, however delusionary, of addressing the concerns of the 99%.

Beachbum Paris 14 hours ago

This is all thanks to Rupert Murdoch

S.D.Keith Birmigham, AL 7 hours ago

Why are Democrats so concerned that Donald Trump might be the Republican Party's nominee for President that the NY Times trots out editorials psychobabbling about his sleep deprivation?

This is hilarious stuff. Trump may be all that the intellectual elite deride him for. Guess what? The people who support him don't care. They are tired of being told how to think by people who suppose themselves to be their betters. They will cast their votes and throw their support behind whomever they please, thank-you very much. That, much to the chagrin of the Progressive idealists who always believe they know better what people should need and want, is democracy in action. It may be ugly at times, but it is much preferred over every other form of governance.

In fact, articles like this, while red meat for establishmentarian dogs, serve only to strengthen Trump's bona fides among his supporters.

And really, does Timothy Egan really believe Donald Trump doesn't know what he's doing or saying? Because of sleep deprivation? Note to Mr. Egan: Whatever is Trump's sleep schedule, it seems to be working well for him. He's winning.

J. San Ramon 9 hours ago

Trump functions well enough to understand this: (1) The media is deceptive with an agenda of its own. (2) Big donors and big money control the career politicians. 93) Politicians can talk talk talk and make plans and policy and get nothing done.

Trump and his supporters are on to all this now. The corrupt media, the corrupt big money and the all talk no action politicians. That is functioning well enough. Trump does not need to function beyond that. His supporters know it and he knows it.

Scott, NYC 7 hours ago

Another cheap hit piece by the Times. Just to fact check Mr. Egan. Trump just did very, very well with Hispanics in Nevada. So who's delusional?

AVT, Glen Cove, NY 7 hours ago

So far the best and the brightest highly educated intellectuals have let the USA down . Trump has a certain kind of intelligence that might be just what we need. He effectively cut through a crowded Republican field packed with ideological purists like a knife through butter. He is a very talented New Yorker who grew up in the 60s and went to Fordham before he went to Wharton. If you want to stick your finger in the collective eye of the "elite". vote for Trump. This message brought to you by a hugely "bigly" educated Queens lawyer. go Redmen

Excellency, is a trusted commenter Florida 9 hours ago

The republican party is the reactionary party. They are a little like the Sicilians described in the novel "The Leopard" where it is said that" In Sicily it doesn't matter whether things are done well or done badly; the sin which we Sicilians never forgive is simply that of 'doing' at all."

Imagine a man of action like Trump navigating that population, from which great jurists like Scalia emerge, and you have Trump behaving much as Egan describes and succeeding. Indeed, in that same novel it is said that "to rage and mock is gentlemanly, to grumble and whine is not."

S.R. Simon, Bala Cynwyd, Pa. 9 hours ago

Matt Taibbi's pitch-perfect HOW AMERICA MADE DONALD TRUMP UNSTOPPABLE (Rolling Stone, Feb. 24) says it all, and to perfection. The Taibbi piece can be found here at this link: http://www.rollingstone.com/politics/news/how-america-made-donald-trump-...

Nora01, New England 9 hours ago

Better a sleep deprived bully than a well rested one, which what the rest of the bunch are. They clearly know exactly how to ruin the country and antagonize our allies.

nzierler, New Hartford 9 hours ago

Ever wonder why Trump invokes the name of Carl Ihkan every chance he gets? Both engage in hostile takeovers. That's the predatory side of business. But how does that qualify Trump to be the Commander-In-Chief? I would not be surprised if a frustrated President Trump threatened to punch Vladimir Putin in the face. The very thought of President Trump is a nightmare, but no less a nightmare than President Cruz or President Rubio.

Dan Weber, Anchorage, Alaska 9 hours ago

John Kenneth Galbraith, who was in parts of his career intimate with government (including being American ambassador to India during the 1962 China-India War) said in his autobiography that sleep deprivation was the least-appreciated weakness of high-level decision makers in times of crisis.

Somewhere I've read of an experiment that concluded that someone who hasn't slept for 36 hours is as dysfunctional as if he were legally intoxicated. And I recall Colin Powell praising Ambien as the only thing that allowed him to travel as he had to. That's interesting, given Ambien's well-known potential amnesic side-effects.

Mike, San Diego 9 hours ago

As you are reading this, recall how a stressful event in your own life interfered with your sleep. Well, given the frantic nature of the current Republican primary season, the travel, the debates, the probing press, the TV interviews, the speeches, the insults and what's at stake, all of the candidates must be sleep deprived. If they were not they wouldn't be human. Donald will do just fine once he becomes president and gets use to the job (or not).

Carrollian, NY 9 hours ago

But what about those who hold those same obnoxious ideas arguably sans sleep deprivation? Palin, Cruz, Carson? Please do a series of columns linking the apparent absence of reason in many of the GOP candidates with the current DSM.

Richard Grayson, Brooklyn, NY 11 hours ago

Good call, though I suspect most presidential candidates need a lot more sleep. A friend of mine who lived near Michael Dukakis saw him a few weeks after the 1988 election, and he recounted that the Democratic presidential candidate said he was now sleeping so much better, that in the hectic pace of a campaign, he wasn't able to take the time to learn "what was really going on" and to process everything.

I used to ridicule President Reagan's legendary afternoon naps. Now I am the age Reagan was as president, and I don't think I could function without napping when I don't get enough sleep at night.

There's a campaign trope about who you want to be in the White House when an emergency call about a serious world crisis comes in at 3 a.m. I want him or her to be someone who didn't just go to sleep at 2 a.m.

CNNNNC, CT 11 hours ago

What is happening now is not about Trump. It's about what he represents. I don't normally read Peggy Noonan but she nails it today. "There are the protected and the unprotected. The protected make public policy. The unprotected live in it. The unprotected are starting to push back, powerfully.

The protected are the accomplished, the secure, the successful-those who have power or access to it. They are protected from much of the roughness of the world. More to the point, they are protected from the world they have created."

http://www.wsj.com/articles/trump-and-the-rise-of-the-unprotected-145644...

Making the election about Trump personally conveniently ignores this new reality.

[Mar 19, 2019] "Monopoly" is such an ugly term.

Mar 19, 2019 | crookedtimber.org

Glen Tomkins 03.09.19 at 5:25 pm ( 2 )

"Monopoly" is such an ugly term. We prefer to call it "market power" these days, because of course it's a good thing if the job creators and their enterprises have more power to do all the good things they do for us.

It's clearly class warfare, if not racism, to use the term of abuse, "monopoly", when you mean "market power".

[Mar 19, 2019] Shotgun Marriage Deutsche Bank and Commerzbank Discuss Merger naked capitalism

Mar 19, 2019 | www.nakedcapitalism.com

Normally, when banks look into merging, the impetus is either opportunism, whether well informed or not, or desperation. The only thing that differentiates the possible combination of Deutsche Bank, long the sickest man of Europe, and not all that healthy Commerzbank is that the desperation isn't driven by the usual urgency, that a bank is about to keel over, unless, as some wags speculate, Deutsche's first quarter numbers are coming in so bad that the bank needs to have some of credible plan to Do Something before it announces the results. One commentor at the Financial Times reported that "DBK was and is having trouble with wholesale funding spreads widening very strongly." That suggests that the German giant, after so many years of limping along, may be too close to a tipping point for the officialdom to sit pat.

Bloomberg also highlighted high borrowing costs due to credit risk:

For Deutsche Bank, the urgency to address the situation is exacerbated by high funding costs and the risk of a credit rating cut. Chairman Paul Achleitner is said to see an expansion of Deutsche Bank's retail deposit base -- which Commerzbank would bring -- as one way to lower funding costs.

Germany is a particularly difficult banking market . Readers may recall how Michael Hudson, in his classic article From Marx to Goldman Sachs, pointed out how it had been inconceivable to Marx that finance-oriented capitalists would win out because their way of operating was harmful to manufacturing. Germany embraced an industry-oriented approach to capitalism, while Britain sought to be the world's banker. Hudson argues that an unfortunate and not widely recognized outcome of Germany's defeat in World War I was it helped advance finance-oriented capitalism into a dominant position.

While I can't prove it (and I hope those who know the German banking market better will pipe up), some of the difficulties Deutsche and Commerzbank are suffering appears to be the results of Germany being ambivalent about bank profits, as in on some level (and perhaps explicitly in some circles) seeing them as a drag on commerce if they rise above a very modest level. The reason I suspect this is that when I worked with the Japanese, who are also strongly mercantilist, manufacturing-oriented, banking profits were seen as a bad thing. Japanese banks had fabulously low returns on assets by global standards and were extremely lean. Sumitomo Bank, which was a bad boy by seeking to be Japan's most profitable bank, was pretty close to Citibank in total assets, had half as many foreign branches and about 2/3 as many domestic branches. In the mid-1980s, Citi had over 100,000 employees. Sumitomo Bank had 16,000 and was planning to reduce the number to 14,500.

Germany's Landesbanken have government backing and their Sparkasse purportedly are not profit oriented. The fact that most advanced economies feel the need to at least one bank as a serious international player is undermined by the big banks having even more difficult-than-in-other-countries competition for retail deposits.

But Germany feels it can't not have a national champion. From Bloomberg :

By bowing to officials' desire to forge a durable German lender with global reach out of two troubled firms, Deutsche Bank's leaders are hardly putting their woes behind them: massive job cuts, political turbulence, a weakening European economy, U.S. probes into its dealings with Donald Trump and a herculean integration – not to mention skeptical clients and investors -- lie ahead if they reach a deal.

That does not excuse Deutsche Bank having long been spectacularly mismanaged. It's been operating under what amounts to regulatory forbearance since the crisis, with capital levels way way below any other big international bank. But Deutsche is the classic "too big to fail" bank. Whether it is too big to bail is debatable, but the EU's new Banking Recovery and Resolution Directive, which banking experts almost to a person declared to be a horrorshow, was supposed to end bailouts and force bail ins .refusing to recognize that that's a prescription for bank runs. And even though Deutsche is very much the German government's problem, as readers no doubt have figured out, German politicians hate fiscal spending and stealth monetization of spending. So until there is a crisis to force their hands, they are allergic to providing official support to Deutsche.

No one is trying to put lipstick on this pig . It's remarkable to see how little support there is for the prosed merger. I've never seen comments in major media outlets, particularly citing the opinions of insiders. From the Financial Times :

The long-mooted idea of merging the two has been met with stiff opposition from the bank's influential unions, and scepticism by five of Deutsche Bank's top six shareholders, who fret that it may derail the lender's internal restructuring.

Among the few clear supporters of a deal are Paul Achleitner, Deutsche Bank chairman, Martin Zielke, Commerzbank chief executive and private equity fund Cerberus, one of the biggest shareholders in both lenders.

Deutsche Bank management had previously been resistant to a merger, but lacklustre performance, combined with the prospect of lower-for-longer interest rates and pressure from the German government to address the lenders' bloated costs and measly returns, triggered a rethink.

Of course, the reason for having to resort to Commerzbank is no major international bank would be saddled with a garbage barge like Deutsche. It's not just that it's hard to see why any bank that wasn't subject to German political pressures would even consider this idea; their regulators would nix it directly or kill the deal by imposing insurmountable conditions.

The nominal excuse for the deal is unpersuasive . The claim is that cost-cutting efforts at both banks have not gone deep enough, and the only way to cut further is to merge. I am admittedly generalizing from the US, but we have had far more bank consolidation than anywhere in the world. Bigger banks are not more efficient. Even if there are theoretical economies of scale in funding and in certain lines of business, they are often not realized. On top of that, there are diseconomies of scope.

For instance, it's clear that one of the hoped-for sources of cost savings is branch consolidation. But the US experience is that this is often a fail. Even when branches seem to overlap, customers don't like it when their favorite branch disappears. More customers than the banks expect leave.

The employees' union expects that up to 30,000 jobs would be axed if the merger went through. A common pattern with US bank deals is that the combined makes cuts that the separate banks could have made but didn't. One wonders here if a reason for the transaction is to bulldoze labor organizations.

The two banks expect to lose customers ..and this comment suggests they are mainly looking at business customers. Again from the Financial Times :

They estimated that while annual costs would fall by €2.3bn, a deal would trigger revenue losses of around €1.5bn because of clients moving business to rivals to maintain diverse banking relationships.

A worsening of the Deutsche Bank train wreck is guarantted . Clive gave a warning when the merger idea hotted up at the end of January:

The big banks have totally lost control of their IT estates. They have no consolidated idea what their installed assets are and what they do. I was on a conference call yesterday which managed to finally conclude -- after 9 months and I am not kidding -- definitively that an application was really still needed (it had been targeted for possible decommissioning).

We bought a US bank's UK book for a specific retail product two years ago. With a lot of luck we'll be able to do a very soft launch post migration onto our hosting (and there was the distinct advantage that we shared the same hosting platform and suppliers) in another six months. Full migration might, just might, be completed in another 18 months. The budget for the migration programme is £1.9bn. For one bloody product book. Bog standard vanilla consumer lending product lines. And we had to take an axe to a lot of the US bank product offers.

DB and CB would burn through their entire shareholders' equity before they even got half way through.

Even yours truly, who is hardly plugged into IT circles, has been hearing horror stories for at least 15 years. Richard Smith flagged this 2018 article, Inside Deutsche Bank's "dysfunctional" IT division . From the top of the piece:

So, COO Kim Hammonds is leaving Deutsche Bank. Less than a month after describing Deutsche as, "vastly complex," the, "most dysfunctional place she's ever worked," and in the middle of a, "difficult transformation," Hammonds has left, "by mutual agreement with the supervisory board." She was, "a breath of fresh air," according to the chairman. In some ways, however, Hammonds does not seem to have been fresh enough.

Hammonds' key task at Deutsche Bank was to streamline the bank's unwieldy array of operating systems. When now ex-CEO John Cryan presented his "Strategy 2020" plan in October 2015, he expressed his intention of eliminating 6,000 Deutsche Bank contractors and cutting the bank's operating systems from 45 to four. Two and a half years later, Deutsche still has 32 different operating systems, and the contractors we spoke to complained that the bank has become "toxic" to work for.

Lots of ugly detail for those of you who like that sort of thing.

And it's not as if Commerzbank is much better. Richard also cited this Handlesblatt story, Buchungspanne verärgert Commerzbank-Kunden , which he summarized as "A recent outbreak of TSB-like core banking cockupry (direct debits and standing orders failing)."

But as he concluded, "There's no set of systems so bad that you can't make them worse by doing a merger, so bring it on, say I."

If nothing else, this merger will be a full employment act of German bank consultants who can take the pain of working on such a mess. But even from this remove, it's obvious that the effort to prop up zombie-in-the-making Deutsche is running out of tricks. This will end badly. The only question is how quickly that becomes undeniable.

Jos Oskam , March 18, 2019 at 3:50 am

" seeing [bank profits] as a drag on commerce if they rise above a very modest level "

Right. I am not German but Dutch, and these two countries are geographically and spiritually close enough to share opinions on lots of things.

There exists a quite widespread sentiment here that "banks do not make profits, they steal somebody else's profits". The idea being that *real* profits are generated in a *real* economy where *real* things are done, built, manufactured and dug up. This in contrast to a "financial sector" leeching off the money streams that inevitably exist in the real economy, only to create pseudo-profits that more harm than benefit said real economy.

Personally, this view to me does not seem too far-fetched. But then, I'm not a banker.

barefoot charley , March 18, 2019 at 11:13 am

I'm not a banker either, but sometimes I want to eat one. Great comment.

Harry , March 18, 2019 at 12:03 pm

Banks dont make profits. They make rents.

vlade , March 18, 2019 at 4:11 am

DB needs to become smaller, not larger. Few years back, it was talking about selling its US equity business, no idea why that fell through. That IMO should be really the first step, not any sort of mergers.

There was an excellen article by somene, maybe even the ex-CEO of DB on its IT woes. IIRC, it was basically that the whole stuff was a collection of fiefs that were built in the last two decades, where the only goal was revenue or day 1 PnL, w/o any idea on what it takes to run the business.

Redlife2017 , March 18, 2019 at 6:42 am

I think that sort of "Worry About Day 2 Operations..but never actually do anything about it" is not an uncommon occurrence. My current firm / senior management is trying to un-pretzel their architecture out of a similar (if on a smaller platform) issue that has built up over 10 years. It's pretty hard to get out of it even with a lot of senior will and money. I can't imagine it building up over 20+ years!

I wonder what DB's data governance looks like. I bet the now ex-COO wasn't able to get the existing power-structure slapped around sufficiently to put the control / governance into place so that the architecture could be unwound. If step 1 (Data governance/ control over existing architecture) is impossible, then the rest is just a side-show (I know from current experience).

vlade , March 18, 2019 at 7:39 am

It's a very common occurence.

At one of my previous gigs, the firm struggled with anything new. I actually came up with a framework for them, which included commited revnue for the product to merge to the main systems, and a hard cap on revenue/no of deals until it was done.

15 years later, I just heard from my colleague there that the system I put in to deal with something is still doing it. It seems that the main cultprit is actually not the FO, as usual, but IT, who saw any successfull implementation outside of their process as a direct threat (especially if it was done on a fraction of their budget).

That then means you get a lot of small projects, which just get done – because the business has to work, after all – but never rolled into anything as the IT dept is constitutionally unable to do so due to its internal politics.

On your other point – well, to have some data governence, you have to know what data you have, and how it works. W/o that, you'll never get there.

Same goes for architecture. It's one thing to draw pretty pictures and boxes to present, but w/o actually understanding what's there now, and how it can work in the future (and that means not just on a sunny day, but when the midden hits the fan too), then control over the architecture gives you little, apart from some IT guys (and gals) getting to play with new technology to put on their CVs.

notabanker , March 18, 2019 at 9:13 am

My last year at a TBTF was working on a project to try and get our arms around architecture standards. It was the first time we had federated the bu based architects. Of course every BU "already had architectural standards". BU A had a documents store with 8000 entries documenting everything they knew about, BU B had a live, breathing web application that changed weekly as their governance process dictated, BU C had a 22 page powerpoint. That was 3 out of 12 at the table.

We took over tracking a global decommissioning initiative. It was basically low hanging fruit to just dump complexity. I found we hadn't even agreed on what decommissioning meant. Apps that were "decommissioned" 4 years earlier were still live in production because we couldn't figure out how to comply with regulatory reporting requirements without leaving it up. Another BU decided they weren't going to try and hit the goal because "they were making money". It was herding cats. Architects would agree to do something, and go back into their BU's and get stonewalled or outright directed to not do it. Regardless, it was a worthy effort because the first step in fixing a problem is admitting you have it.

My experience is that the IT orgs mirror the BU structure and governance. In three massive banks, I've only seen one centrally governed IT group, which very much mirrored how the company was run. It was an acquisition machine and the core merger methodology was to merge onto a common platform. The number 2 exec in the company ran the mergers and was ruthless, the CEO never flinched. There would be no legacy. It failed during the crisis, largely because that strong central governance made fatal business decisions that killed the whole org. So be careful what you wish for.

Harry , March 18, 2019 at 12:18 pm

Fascinating and makes perfect sense.

One of the UKs largest asset managers comes to mind as an example of the Centralization through IT platform approach.

All Investment Banks are to a great degree just franchise businesses. Go and make some money. Here is some budget and some desk space. Buy a computer and get on with it.

And they wonder why things sometimes go wrong.

Colonel Smithers , March 18, 2019 at 10:43 am

Thank you, Redlife.

Data governance?

I don't think that the firm would even know the concept.

Further to Clive's point, the group is a carcass for so-called professional services parasites to feast on.

The combination will be the German HBOS/Lloyd's. As there are NC contributors at that basket case, perhaps they will pipe up

Colonel Smithers , March 18, 2019 at 8:39 am

Thank you and well said, Vlade.

When I arrived in June 2016, I was told there well over a hundred systems in use. In essence, whenever some star signing was made, such star was told to go and buy whatever he / she needed.

To this day, the IT dysfunction continues. Sometimes, good systems are taken out of service due to cost and ones that can't work with what's left are retained. Go figure!

In addition to equities, the structured and leverage finance toxic waste should also go.

I get the impression that Stefan Hoops, the new head of global transaction banking, will detach bits from Treasury, Markets and Corporate Finance and add them to GTB and make a commercial bank, a new core to the bank. One can expect a pull back from the US, too.

The new model is likely to be Barclays plus, i.e. commercial banking with some IB and asset servicing, not a pure commercial bank like Lloyd's.

vlade , March 18, 2019 at 8:43 am

That new model would make much sense, as DB cannot survive just on commecial banking in Germany (Any plans to do just that would pretty much kill it, as it's too large to be supported by that), and there's no reasonable retail play unless it wants to to outside Germany.

But it would still require dropping substantial parts of the IB business. I see very little appetite for that..

chuck roast , March 18, 2019 at 10:51 am

Amazing! Yves' post and the various comments make it sound like IT has all the properties of a virus. Almost impossible to cure or expunge when it becomes dysfunctional. Moreover, its components can become toxic and morph into some new form.

I can't wait for AI!

notabanker , March 18, 2019 at 11:39 am

To me it's like accounting or engineering or operations. It's a reflection of the business. Keep in mind the example above represented a global MNC with 3 distinct credit card businesses, three distinct retail banking franchises, trading in every major capital market, investment banking organized by US, EMEA and Asia, Wealth Management with distinct philosophical differences by geography with core operations on 4 continents. And I suspect this is small time compared to Clive's experiences.

These organizations are too big and far too complex. NC has had numerous posts on how scale drives inefficiency once reaching a certain point. This is 100% the case.

flora , March 18, 2019 at 11:55 am

The heart of the banking and other IT problems, imo, is this: The people who wrote the original code to perform specific tasks understood, or were advised by people who understood exactly what the task was, what it did, how it fitted into the overall banking process , and what specific process upstream and downstream handoffs were required.

Bring in a new generation (or two) of new bankers who assume "the computer handles that" – without understanding the what and why of whatever 'that' is. Now you have the problem of not only computer integration, but also the problems of lost competency and lost institutional memory of core banking functions. That's before taking into account the budget cutting undermining IT departments, creating its own disfunction. imo.

Sound of the Suburbs , March 18, 2019 at 8:25 am

Bankers are like puppies and someone else needs to clean up the mess they leave behind.

"It's nearly $14 trillion pyramid of super leveraged toxic assets was built on the back of $1.4 trillion of US sub-prime loans, and dispersed throughout the world" All the Presidents Bankers, Nomi Prins.

Look at the mess those naughty banker puppies have made, who will clear it up for them?

The structure of the Euro-zone meant there was no one to clean up properly after those naughty banker puppies.

No wonder DB is in trouble.

Mark , March 18, 2019 at 9:34 am

Speaking with no more qualification than being German, I would not say that banking profits are unwanted in general rather the industry has two or three significant challenges compared to the US.
First of all profit margins are very low across all businesses, even favoured ones such as automotive struggle to generate double digit operating margins and a sustained double digit net profit margin outside IT is very rare. Second there is good competition for retail customers and switching banks or keeping several accounts at different banks is very easy. 'Normal' banking consisting of debit card, credit card, online banking, wire transfers, ATM service and savings account are available for everyone not involved in personal bankruptcy proceedings free of charge. Hence 'access to deposit funding' not making profits is cited as a reason to merge. Interestingly the Sparkassen are usually on the expensive end of retail because they are committed to local branches and good conditions. The third point I would like to raise is more of a probably justified stereotype – Germans do a lot less borrowing than some other cultures see for instance private debt to GDP figures. Where I grew being in debt was considered shameful and everyone tried to pay back their debt ASAP be it 5 Mark for lunch or the mortgage on the house.
Other financial sectors, for instance insurance, do very good business and achieve significant profits in Germany.

Ignacio , March 18, 2019 at 7:08 pm

I don't think the difference you mention can be symplistically qualified as "cultural". It may also be, and probably more importantly, about incentives put in place to promote debt growth or lack thereof. Could it be that Germany didn't put them in the first place to prevent consumption and force surpluses or, easier, lending rates were in comparative terms and in relation with inflation higher in Germany than other Euro countries. If you believe that people in Spain, for instance, is willing to become wildly indebted to buy a house because of 'cultural reasons' you are mistaken. It is that many feel that there is no alternative. But then, becoming indebted results in a culture of debt

I have read that by the end of 2018 consumer credit and the housing marke were heating in Germany .

[Mar 18, 2019] Middle Class Once Meant Stability and Now Means Fragility

Notable quotes:
"... Was the American Middle Class a Cold War thing? ..."
"... The British middle class seems to have been mostly people living on investments -- not in the manorial style, but with enough to have a flat, and a servant -- in a style that you might associate with Sherlock Holmes. A middle class that included people with jobs definitely seems post-WWII, and, of course, since the wage stagnation starting in the mid 1970's, it's mostly ended by now. ..."
Mar 18, 2019 | www.nakedcapitalism.com

By Alissa Quart, Executive Editor, Economic Hardship Reporting Project. Cross posted from the Institute for New Economic Thinking website

feel that being middle class is not what it once was and that we are all running in place as fast as we can to stay the same, to quote Alice in Wonderland's Red Queen," Brenda Madison, an art director and graphic designer in Laguna Beach (Orange County), told me. "Never did I think I would worry that Social Security and Medicare may not be available in my future or that a medical injury or unexpected repair would bankrupt us."

She and her husband, now in their middle years, "are not sure we will be able to retire in our home."

Patricia Moore is a single mother of three who lives in a two-bedroom apartment in Los Angeles and a licensed vocational nurse working in hospice about to take the licensing exam to be a registered nurse. Due to a shortage of space, she sleeps on the couch and is "still struggling to make ends meet." Her rent is $1,598 a month, her pay is about $3,200, and her student loan payback is $375 a month. Moore recently has had to resort to a GoFundMe campaign so she could stay home with her daughter during a monthlong health crisis, and has at times had to donate plasma. She said she is unable to provide "the extras for her kids."

Moore began to enter her youngest son in focus groups in office buildings or hotels in neighborhoods like Beverly Hills. Sometimes he would make $75 an hour and the whole family would eat from buffets, the kind with cantaloupe, and maybe they'd also get a gift card. At first, he tested toys and then video games but also an MRI to map his brain. It was only because of these gigs that Moore could finally say, "Go buy yourself something," to her children.

The extreme cost of living has forced some California families to take unusual steps like this. As the Department of Housing and Urban Development recently reported, a family of four in the San Francisco metropolitan area making $117,400 a year qualifies as "low income."

These were Americans for whom the meaning of middle-class life had altered from something stable to implied economic fragility.

Their burdens were the price of health and child care, educational debt or a housing market gone berserk. They wanted job security, pensions and Social Security and unions, but these things seemed like a fantasy out of a mid-century American novel like "The Man in the Gray Flannel Suit." The middle class' long historical association with the status quo -- strongly identifying with institutions or corporations, rejecting restive discontent -- has made their new wobbliness all the more startling to them.

But when did that vulnerability start? Toward the end of the past century into this one, there was a rise in what author Barbara Ehrenreich has called a "fear of falling," an anxiety among the professional-managerial class about downward mobility. I think of fear of falling as the opposite side of the coin of American individualism and its historic promise of social and economic progress.

Since the 1980s, some members of the middle class have gone "from a kind of security to being reduced to the kind of economic unstable state that working-class Americans have had to experience forever," explained Caitlin Zaloom, an anthropologist at New York University who studies the middle-class financial experience. The office or academic job started to resemble the precarious work life that working poor Americans have long understood to be their lot, she said. And then there are the robots waiting in the wings to take their ostensible share of middle-class jobs, and soon.

This new fragility is one theory to explain the 2016 election of Donald Trump. Trump voters were sometimes mistaken for all hillbilly elegiac or Rust Belt proletariat. In truth, an estimated 38 percent of white people with bachelor degrees voted for the man -- closer to "office worker elegy." Indeed, as much as Trump's messaging has been jingoistic or racist, he has also been addressing middle-class anxiety when he continually repeated that the system is "rigged."

While some have protested that Trump's success has more to do with loss of status or rank bigotry, Johns Hopkins University sociologist Stephen L. Morgan has conducted studies that reveal one substantial motivator of the Trump vote was economic. He noted that a successful national Democratic candidate would be one who appealed "to people who have not fared well in the postindustrial economy," such as those in some once-prosperous areas of the Midwest.

Ordinary middle-class people's struggles can be, of course, ameliorated by broad shifts, such as adopting a form of universal basic income or a flat monthly cash stipend for familial caregivers of their young or elderly kin. And we should at least explore adopting Medicare for all, to address rising health care costs. We also need to more effectively push for longer paid parental leave -- or, in many cases, any paid parental leave.

But if we can't get relief from federal programs or our employers, we will need to craft local or state solutions. Retaining rent stabilization laws is key in our cities, as is building more affordable housing for, say, teachers and municipal workers, so they can continue to live in the places they serve.

Finally, I saw when reporting my book that, when squeezed, people revealed their financial woes to others, they tended to then recognize that their obstacles were partially systemic. That, in turn, meant they didn't simply internalize their real-world burdens into self-punishment. They seemed more able to patch together personal solutions -- small-scale child care fixes like sharing pickup with their neighbors, for instance.

Simply voicing hopes and difficulties, and making them audible for their leaders to name and address, is a small part of what must happen for things to change. Although for some, these needed transformations may seem to be coming too late.

As Madison put it, "We are trying not to think too much about the future."

This article was supported by the Economic Hardship Reporting Project and was first published by the San Francisco Chronicle .

ambrit , March 18, 2019 at 3:23 am

My ground level observations indicate that there is a lot of "denial" going on in the minds of the putative 'middle class.'

One major barrier to the public 'conversations' about the economic malaise affecting America today is the still prevalent custom of shaming the victims of bad luck. I see this tying all the way back to the Calvinist theological concept of "Election," which is an aspect of "Predestination." In effect, one suffers in life because the Deity chooses to make it so. Thus, those who do well in life can "legitimately" look down on those who suffer. It is a perfect excuse for callousness of heart.

We read Weber's "The Protestant Ethic and the Spirit of Capitalism" in class in my High School. Written around 1900, it still has merit as a descriptive and predictive tome.

Die wiki: https://en.wikipedia.org/wiki/The_Protestant_Ethic_and_the_Spirit_of_Capitalism

Old ideas die hard.

marieann , March 18, 2019 at 9:44 am

"The rich man in his castle,
The poor man at his gate,
God made them, high or lowly,
And ordered their estate."

Just so we know our place and stay there

Sanxi , March 18, 2019 at 12:24 pm

"Capitalism is a that system which has become that which the living are converted to the the living dead."

jrs , March 18, 2019 at 12:53 pm

Some of what is perceived as shaming, may just be understood as trying to understand how those with good professions etc. end up that way (and no I don't judge those without "good professions" – I don't think we choose our fate to any real degree see. It's just takes more to understand why is all). Now from the inside some good professions are not really, or have become so niche that that is the story but

Acacia , March 18, 2019 at 5:11 am

Mod: looks like some issue in the first paragraph

Amfortas the hippie , March 18, 2019 at 6:31 am

This:"Finally, I saw when reporting my book that, when squeezed, people revealed their financial woes to others, they tended to then recognize that their obstacles were partially systemic. That, in turn, meant they didn't simply internalize their real-world burdens into self-punishment. They seemed more able to patch together personal solutions -- small-scale child care fixes like sharing pickup with their neighbors, for instance."

commiseration is new, in my experience. not too long ago, one didn't speak about economic difficulties in polite company at least in the middle class(poor people, oth, sometimes do) that they're finding such behaviour is worrying, as it means the precariousness is spreading which causes cognitive dissonance, since it's counterintuitive according the the Narrative we're all supposed to cling to.
to wit, in my recent exposure to network tv in hotels and dr's offices, i note that -- like in the Matrix–a grand illusion of the late 90's is laid across the world.

I hear locally upper middle class soccer moms having lunch, and it's oneupmanship all around everything's fine, and we went to the most wonderful resort, in our new suv, and our son married a doctor and they honeymooned as missionaries (!) but it's all nonsense, and everyone knows it.(the quick flash of panic in their eyes, "will the card work?")

That was the norm not so long ago all the way down to the dregs of the former middle class. i see the rending of that pretension the misty veil of utopian just-worldism as what's at the root of so many of these dislocations an eruptions of late.

"Believe Real Hard" just doesn't cut it any more, and those soccer moms don't know how to think about it. Per Ambrit's reference to Calvinism, at some point reality intrudes and one must climb down from the pillar.

jefemt , March 18, 2019 at 9:03 am

Becoming They and The Other. It can't happen to me -- I am a Exceptional! ™ (and white). Could Compassion be on the horizon– on the wax as more and more realize they are in the global Lemming-fall rat-race to the bottom ?

kareninca , March 18, 2019 at 8:48 pm

They're not attending/joining churches because that costs money and they don't have the money. Once there are more "churches" that only cost what people can afford, more people will attend. Just a prediction.

sanxi , March 18, 2019 at 12:30 pm

Sadly first the great suffering must turn into the great awareness that it's not your fault than love oneself and compassion for all else

jrs , March 18, 2019 at 12:58 pm

it's not all illusions, a part of the population is doing pretty well, they take vacations and crap (who even has ANY paid time off anymore anyway? not me. even STAYCATIONS are off the table! Heck getting a cold is pretty much off the table ..). But others

But yea the Big Lie Narrative of these times is that the economy is doing well, Trump's economic performance will get him reelected (this economy is total garbage, so F trump and the horse he rode in on), unemployment is low and other BS.

The Rev Kev , March 18, 2019 at 6:32 am

Lots of sad reading here. But seriously – $117,400 a year qualifies as "low income."? I know that it is true but at the same time that is so stupid on the face of it. I do have to admit here to a weakness for nostalgia – especially for places that I have never experienced but have read about. Sometimes out of idle curiosity I might flick through a few videos like that on America in earlier times and you can see one such clip at

https://www.youtube.com/watch?v=ECFH3Pe21oQ or at this one at https://www.youtube.com/watch?v=QOr1fIIHQFk

Having said this, I sometimes wonder what would have happened if neoliberalism had spluttered out during the 1970s as a nonstarter of an idea and instead a different timeline had formed. In this one, instead of wages flate-lining back in the 70s, they had kept apace with GDP like they had the previous thirty years. People, more secure in their wages, would never have embarked on the credit boom like they did when wages dropped. In this timeline too the rich are still taxed at 70% which mopped up all the surplus that would otherwise have instead gone on to founding think tanks and money in politics. With an affluent population, there was never was a need to import so much from China and the unions were still strong enough to stop industries being shipped off to there. It would have been a completely different America.

But that is another timeline and we are instead in one where people will soon be in a position where they have nothing else to lose. And that is a very dangerous proposition that. And they still have potentially a very powerful weapon – their numbers. And their votes.

russell1200 , March 18, 2019 at 9:00 am

The 70s were going to be a very tough decade: The loss of our huge post-WW2 advantages in manufacturing, oil shocks, a very expensive war to pay for, and Watergate probably fits in their somewhere.

I am not sure what we did in the 70s and after was exactly neoliberalism, but any restraint shown in the face of the new realities (Carter and his sweaters, Bush breaking his tax pledge) were massively unpopular, and I think that was going to be the case in general – regardless of what path we went down.

The very idea that neo-liberalism was the cause (as opposed to an interaction with) of the root problems I think is indicative of over optimism about our situation. Contrary, I do think it is very reasonable to say that neo-liberalism made the problems worse.

The distinction is important, you can reject our current situation and policies, and still not be particularly convinced that the opposing voices are being more realistic.

Carla , March 18, 2019 at 9:44 am

After reading "Democracy in Chains" by Nancy MacLean, I'm leaning toward neoliberalism as a cause. It kicked into high gear with Reagan's election in 1980, and Bill Clinton made sure there was no stopping it.

In reference to this from the original post: "In truth, an estimated 38 percent of white people with bachelor degrees voted for [Trump]," I have to say, I think you call those people Republicans, and don't kid yourself. They will do it again.

Sanxi , March 18, 2019 at 12:43 pm

Carla, thank you, exactly so. The technique of it all was quite insidious, as it was an appeal disguised and self righteous to greed to a two groups: baby boomers and their parents sociology primed for such pitches. Once that genie got out of the bottle there was no getting it back in.

polecat , March 18, 2019 at 1:12 pm

So, will the millenials kill-off the Genie for good .. or will they, in their turn, rub that lamp all the more, to parlay their 3 wishes towards other equally speciously sparklely endeavors ??

super extra , March 18, 2019 at 3:31 pm

we can't 'rub the lantern'; when those in power in 1981 set off down the neoliberal road, the conditions of their wish were fulfilled by debt-enslavement of everyone who came after them to support enriching those who clawed their way to the top.

the only millennial oligarch is Zuckerberg and I don't think anyone believes he is going to maintain his power even half as long as, say, Bill Gates. the only millenials who believe in neoliberalism are paid shills for the elite like Ben Shapiro or Charlie Kirk and by the same Zuckerberg:Gates ratio, they have less than half as much power as a Rush Limbaugh.

Neoliberalism is dead, we're in the gramscian interregnum, at this point I just hope and plead with the infinite that we get Bernie in 2020 instead of Cotton/Creshaw primarying Trump or something awful like that because the familyblogging Democrats refuse to pass the torch in favor of one more term of grift.

russell1200 , March 18, 2019 at 1:32 pm

Rev Kev, who I was responding to, correctly noted that the 1970s were when wages began to drop. Ronald Reagan and Bill Clinton of course come later. This doesn't mean that their policies were not problematic, but it does make it difficult to blame them as the causal agents of something that started in the 1970s.

If you want to blame Johnson/Nixon and their Vietnam War policies, that would make some sense, but they don't seem to me to be poster children for Neoliberalism with one being associated with the Great Society and the other the author of price controls to suppress inflation.

witters , March 18, 2019 at 6:48 pm

When things get a bit tough (and note that in the 70's for all the hype they were not in fact that tough – until govt policy of a NL kind stepped in) – then you have policy choices. If you go NL, then that is a choice, and causally so. (It was usual to hide this causality in TINA.)

scott 2 , March 18, 2019 at 9:15 am

Financialization of the housing market creates obscene rents, leading to less household formation, then the need to "do something" about population decline. Japan is 20 years ahead of us in that regard,

Dan , March 18, 2019 at 10:06 am

$117,400 a year qualifies as "low income"?

Indeed it does here in the SF Bay Area. The surprise of it all is part of the denial – the wife and I look at our family income (usually 10-20% less than that) and are straight up perplexed that it doesn't go as far as it "should". We certainly have a pleasant enough middle-class life, but it feels precarious in a way that we never expected. And we only have that because we have subsidized housing (we live in a house the family has owned for years, so are paying well below the insane market rates). If we had to pay market rates we would be poor, or close to it.

We certainly rant to one another about the systemic issues behind this situation, but there are a lot of California liberals who bitterly cling to questionable ideas like a balanced budget or Kamala Harris.

I've been wondering when I'll hear a candidate advocating lower home and rent prices – where I live we absolutely need that if we're to keep a semblance of civilization and democracy.

ambrit , March 18, 2019 at 11:53 am

You have hit on a major 'disrupter' of the body social. "Civilization and democracy" are being willfully sacrificed to the Gods of Profit. That betrayal is a core part of neo-liberalism.

Carla , March 18, 2019 at 5:27 pm

Re; lower home and rent prices. For the last 40 years, as the prosperous Great Lakes region became the rust belt, we who live here have been constantly told: if you want a job, just MOVE to where the jobs are.

Now are we allowed to say to the mortgage-or-rent-impoverished middle class folks who live on the coasts, "If you want lower house and rent prices, just move to where the lower priced houses and apartments are" ? We got plenty of room for y'all here, honest. And we're mostly midwest-nice, too.

Altandmain , March 18, 2019 at 5:34 pm

Unfortunately a candidate advocating for lower prices of housing will likely be defeated by thr NIMBY types.

JBird4049 , March 18, 2019 at 12:04 pm

But seriously – $117,400 a year qualifies as "low income."?

If you are very lucky, and I mean lucky , you might find an old junior one bedroom apartment for the low, low price of $1,500 a month. No patio, no dishwasher, no nothing except a parking spot. This is not exaggeration, sarcasm or humor, but reality. In some places in California it's closer to three thousand dollars.

Most of us Californians do not make even fifty thousand and, if we do, we have to live closer to the cities where the well paying jobs are. I keep waiting for the housing bust to arrive for last time the rents dropped as much as thirty percent. Hopefully, I will still be in my apartment, or at least in an apartment when that happens.

rd , March 18, 2019 at 1:49 pm

Another factor is cities not allowing for higher density housing. If somebody has a brownstone or something similar, they will fight tooth and nail against that 6 story apartment building that would allow a lot more people to live in the neighborhood. Under-investment in rapid mass transit also hurts workers commuting to jobs and forces far more cars on the roads and parking spaces.

Ed , March 18, 2019 at 7:36 am

Was the American Middle Class a Cold War thing?

pretzelattack , March 18, 2019 at 8:10 am

it was certainly precarious in the great depression, seems to thrive in boom periods. the white middle class, and some of the black middle class did well in the 50's and early 60's. that was when the us was economically at the pinnacle of the world, and i think that was because most of the other first world economies were rebuilding from the rubble of ww2.

Wukchumni , March 18, 2019 at 8:30 am

The only item I can think of that was an import from the Soviet Union and on retail shelves for sale here during the Cold War, was Stolichnaya vodka, and as far as the Peoples Republic of China goes, fireworks.

If I didn't finish the food on my plate, my parents would admonish me with tales of people starving to death in China, and indeed they were.

ambrit , March 18, 2019 at 11:16 am

For me as a child, the starvation place was Africa. I wonder about the psychological motivations that made our parents ignore the suffering right nearby in our own neighborhoods and focus instead on some far away place.

Today, that starvation is all around us. I personally feel guilty now that we cannot give very much to beggars and homeless etc. due to our own straitened circumstances. The myth of "The Exceptional Ones" (TM) is still a strong part of the social narrative today.

polecat , March 18, 2019 at 1:34 pm

I try to do my infinitesmal part, ambrit .. by taking any surplus from the garden, when there IS a surplus that is .. and donate it to the local foodbank. Last year it was 5 full lugs of grapes fresh off the vine, a few yrs before that it was an over abundance of beets. This season it might be potatoes THATs My lifestyle !

All on less than a $35,000 yr combined income. But that means no trips to Cancun, no new Car every couple of years, no DeathCare expenditures, and no mortgage.

I feel humbled every time I make a delivery, especially when I see families in obvious distress w/ young children .. looking for sustenance that they cannot otherwise afford to buy .. it breaks my heart.

ambrit , March 18, 2019 at 4:23 pm

Yes to that. We got a bumper crop of 'volunteer' Muscadines last year. They made good jelly. I should build a trellis or wire support network for the vines this year. With this weather, we should get another good crop.
Living the 'prepper' life has it's compensations.

polecat , March 18, 2019 at 6:31 pm

Our's were primarily muscat as well, what we donated. I ended up canning the rest, turning them into muscat conserves half of which we've already given away to friends and aquaintances. The other grapes, the Mars variety, became raisins, for home consumption.

Everyone should learn how to can .. cuz you never know when just-in-time .. just STOPS !

John Wright , March 18, 2019 at 11:06 am

re: American Middle Class Cold War thing?

Possibly this was a major influence. When the USA had identified large foreign enemies that must be countered (Russia and China) there was an impetus to build in America and keep the USA population engaged with the Russian and "Red" Chinese threat.

The USA was also an oil exporter until 1971, which allowed some control of oil prices.

Globalization was not prominent and I remember the poor quality Japanese tools of the 1960's (and Chinese manufactured stuff rarely seen by me (firecrackers?))

Furthermore we had two large countries that economically were not as advanced as the USA and were not viewed as particularly successful with their flawed Communist systems.

Effectively, China and Russia were playing the game with one hand tied behind their back.

This may also have allowed USA unions to be strong, increasing wages for union and non-union workers.

Perhaps the USA is currently making some other countries focus inwardly on their countries as the USA did in the 1950's and 1960's.

By forcing sanctions on various countries (Iran, Russia, Venezuela) the USA may make them less dependent on global resources and more like the more self sufficient USA of the 50's and 60's.

Mel , March 18, 2019 at 11:23 am

Very, very possibly. Thanks to Project Gutenberg, I'm reading a lot of fin de siècle novels and literature, e.g. Booth Tarkington.

The British middle class seems to have been mostly people living on investments -- not in the manorial style, but with enough to have a flat, and a servant -- in a style that you might associate with Sherlock Holmes. A middle class that included people with jobs definitely seems post-WWII, and, of course, since the wage stagnation starting in the mid 1970's, it's mostly ended by now.

Harold , March 18, 2019 at 1:53 pm

Middle class always had servants because cost of labor was low. Middle class households sometimes had boarders & often elderly or unmarried relatives.

MisterMr , March 18, 2019 at 9:00 am

"While some have protested that Trump's success has more to do with loss of status or rank bigotry, Johns Hopkins University sociologist Stephen L. Morgan has conducted studies that reveal one substantial motivator of the Trump vote was economic. He noted that a successful national Democratic candidate would be one who appealed "to people who have not fared well in the postindustrial economy," such as those in some once-prosperous areas of the Midwest."

But this is circular reasoning, why would people in the "middle class" think that Trump's policies are better for them than Clinton's policies?

It's not like Trump is a sort of middle class guy himself, in facts H. Clinton is probably more "middle classey" than Trump.

Plus, what does the term "middle class" mean specifically? How are these people different from "working class" or small bourgoise?

Wukchumni , March 18, 2019 at 9:08 am

Middle class to me growing up, meant that the school custodian across the street and 3 doors down from us, could afford to buy a home, or you played little league with the son of a gas station owner, who made enough from his 2 service bays always full (cars weren't nearly as reliable in the 60's) to also own a home.

MisterMr , March 18, 2019 at 1:10 pm

Thanks for the answer.

My doubt about the middle class is this: it is a term that various schools/sociologists/economists used to mean very different things, so when someone speaks of the middle class it's difficult for me to understand what he/she is speaking about.

For example:

1) In marxism it generally means the small bourgoise, meaning the small shopkeeper, the farmer who owns his land etc;

2) at times, it just means people of the working class who have good jobs, that is different from the definition (1). The disappearence of the middle class just means the disappearence of good jobs;

3) sometimes (wrongly IMHO) "workers" are supposed to be only blue collar and only without high education, so "middle class" means people who have a degree and are white collars;

etc.

At times these categories can somehow mix but the class interest of someone who is a small business owner is different from the class interest of someone who has a good employee job which might be different from the interest of someone who could have a degree and a sucky white collar job.

So this very general idea of middle class is very confusing IMHO.

Carla , March 18, 2019 at 5:40 pm

@MisterMr -- I think that because EVERYTHING in the good ole US of A is about money, the understanding of a term like "middle class" becomes just about money, too.

When I was young (yes, a long time ago), I was given to understand that "middle class" meant basically people with white collar jobs or jobs that required some professional accreditation: teachers, nurses, lawyers, accountants, etc. "Working class" meant people with blue-collar jobs, even if some of them regularly made more money than a teacher or, say, a nurse. "Upper class" included high-earning professionals, CEO's, and of course those with inherited wealth. Poor, then as now, was the one thing you definitely didn't want to be.

But, as I said, money has obliterated all those fine distinctions of snobbery. Now there is only one: $.

JBird4049 , March 18, 2019 at 7:34 pm

The label of "Middle Class" in America can be used as either for the social class or for the economic class with the white collar workers generally being both and the blue collar workers being, before the 1950s, working class with working class wages. For about two decades the high and low ends of the income range collapsed with most people being squeezed into the economic middle class regardless of social class.

Now, income disparity has destroyed the economic middle class and the classic pyramid shaped map of the social and economic system reappearing. The tiny wealthy elites; the slightly larger service and professional class providing what the elites want; the small number of bureaucrats, lawyers, doctors, mechanics, religious workers and so that any large societies need just to function at all; the greatest numbers are the laboring class, and I don't mean the working class.

The mental map of most Americans is stuck on the almost flat pyramid of 1970 in which all classes were getting wealthier collapsing together economically, with the exception of the wealthy not gaining wealth at the same rate as the bottom 99%. Even the poorest blacks finally started to improve economically.

That picture is buried somewhere deeeep in our collective heads where the only real differences was what type of job you were going to have and where mistakes, failure, and disaster did not mean poverty. At worst, it meant a change of work or a temporary set back or a change of social class but not economic class.

Find that image in your head, yank it out, put a stake in its heart, burn it, and scatter the ashes. That picture died around 1973. Whatever the truth of that image it is long dead.

But too many people are trying to pretend that we are not living in a zero sum game of winner take all.

John Wright , March 18, 2019 at 11:17 am

Trump had the advantage that he was not tagged, directly or indirectly, with Bill Clinton's NAFTA, welfare reform or supporting "Free trade" that seemed to only work well in economists' minds (TPP).

Clinton also supported the Iraq War, Libya and other military adventures, and Trump couldn't vote for/against these operations that directly affected their communities.

Campaigning Trump called these wars "mistakes" while Hillary C would not.

Someone summed the election as "With Hillary you know you are screwed, with Trump you might not be."

MisterMr , March 18, 2019 at 1:12 pm

Thanks, however it is a fact that a situation of bad economy and increasing inequality, that ideally is supposed to be the main reason to vote left, is causing an upsurge in right-leaning populism instead.

And not only in the USA.

john Wright , March 18, 2019 at 3:02 pm

One could argue that the USA reluctantly moved left in the Great Depression while Nazi Germany and Italy moved right.

In the USA, recently the left has been cast as weak and ineffectual.

The left doesn't "bring home the bacon" in the minds of many.

Bernie is popular, but the knives are out from the establishment pols (of both parties) to do him in.

In the USA, moving to the populist right, to me, seems quite understandable.

jrs , March 18, 2019 at 3:46 pm

there is no populist right that brings home the bacon in the U.S. either as far as I can see. Theoretically there could be, but theoretically a lot of things, including much more plausibly and likely the rise of a left that brings home the bacon. IOW the trains don't even run on time now.

jrs , March 18, 2019 at 1:05 pm

Trump's economy is scarcely better than Obama's (depends on which year though, in the worst of the Great Recession only then was it worse). So if it's really about the economy: then Trump will lose the next election.

MisterMr , March 18, 2019 at 1:14 pm

IMHO it IS about the economy, but not in the direct sense we mean: if the economy goes on as it is, Trump will be able to spin it as good, whereas a democrat would be toast.

But I expect a recession to hit earlier, in which case I think Trump will not be re-elected.

Norb , March 18, 2019 at 9:28 am

Whenever I read articles illustrating the dawning awareness of the middling classes to their extreme precarious social status, I can't help but marvel at the audacity of elites jumping to the front of the protest line proclaiming their desire to "lead" the distraught masses. Even more so, those same distraught workers giving their oppressors the opportunity to do so. That is the definition of a dysfunctional society- rewarding failure. The elites might think themselves clever, and exceptional, for dreaming up such scams, but that dynamic alone goes a long way to explaining the rapid decline of America's prominence in the world.

America is consumed by a cynical rot that has firmly entered into the body politic. There is no easy way to excise this cancer, but the answer must lie in some form of national mission. The current American leadership have chosen a militaristic vision of conquest for the nation masked with a marketing program of bringing democracy to the world. This contradictory scam will not work, and there is ample evidence showing just how destructive and impotent this strategy truly is. The rest of the world is moving on, and if Americans don't wise up to the the destructive nature of their system, they will be left behind.

Corporations must be in the service of the nation, not the other way around. Corporations must be allowed to die and change, the nation, and its people must prevail over time. It is an obscene contradiction that the American system is reversing this dynamic. The people are allowed to die, while the corporations, and those that control them are allowed to persist.

As a working class American, my only desire at this point is for an American elite leadership that has a vision larger and broader than worshiping a bank account. If American workers don't demand a better leadership, history will show them to be worse than peasants, they will be proven to be willful consumerist dupes.

America is in an identity crisis- a cultural crisis. That does not bode well for the nation and makes it ill equipped to deal with other nations and the world's problems- let alone our own.

Summer , March 18, 2019 at 10:16 am

"The current American leadership have chosen a militaristic vision of conquest for the nation masked with a marketing program of bringing democracy to the world."

That train officially left the station around 1898.

Oso , March 18, 2019 at 1:27 pm

agree although the date closer to 1620 when the militaristic conquest of nations began.

Summer , March 18, 2019 at 2:25 pm

"masked with a marketing program of bringing democracy to the world."

For the USA, those thoughts didn't get put into action until post Civil War

Rod , March 18, 2019 at 11:41 am

"There is no easy way to excise this cancer, but the answer must lie in some form of national mission."

here lies the way to better angels and there is no shortage of things that must be done

diptherio , March 18, 2019 at 1:36 pm

As someone on social.coop said the other day, "they're not 'elites,' they are 'the predatory class'."

Joe Well , March 18, 2019 at 10:31 am

Thank you for posting this.

1. The author doesn't really explore how rent extraction through housing is the single biggest destroyer of American household wealth, with housing costs outpacing wages almost everywhere.

2. "Explore" Medicare for all? Build "affordable" housing, but only for certain deserving individuals like teachers?

It's disappointing that the author chooses to end this with such centrist Dem proposals.

There needs to be a right to housing, which means a right to build housing: abolish any zoning that excludes dense residential development. Seize land by eminent domain if necessary.

Jerry B , March 18, 2019 at 1:55 pm

===There needs to be a right to housing, which means a right to build housing: abolish any zoning that excludes dense residential development. Seize land by eminent domain if necessary===

Thanks Joe. While I am not an expert in housing, the lack of affordable housing seems to be tied to:

1. As you say zoning laws that exclude dense residential development.
2. Land Use regulations which are probably tied to #1 above.
3. The high costs incurred by residential developers in navigating the byzantine and bureaucratic maze of permits and regulations at the federal, state, and local levels.
4. The speculative nature of the housing market i.e. IMO the housing bubble is driven by monetary policies and the actions of "behind the scenes" lever pullers. If housing is treated as a commodity by the finance sector then the machinations of Wall Street can impact housing prices as they did in the 2008 crash.
5. To my point above, in the far northwest suburbs of Chicago there is a lot of empty office space and light industrial space. So excess supply would tell you that the prices for these properties should go down. Not the case. They are still expensive. If a homeowner is trying to sell their house they will lower the price until it is sold or not sell it. But the same rules do not apply to businesses.

To #5 above, again if we "believe" what we are told in Econ 101 about free markets and supply and demand then an excess supply should result in a downward price drop until the excess supply is cleared. God help me! I just typed the previous sentence from memory as if verbatim from my Econ 101 class 30 years ago!! #head on desk! So if office and industrial prices are not dropping then someone has to be holding the "bank notes" as is not concerned about if or when they sell.

Basically in short it seems zoning issues and cost issues are the big obstacles in dense residential development. I am not an advocate of relaxing regulations which could result in shoddy and unsafe construction but maybe there is a middle ground. Something needs to be done.

polecat , March 18, 2019 at 3:16 pm

It's not just dense housing, it ALL housing .. in terms of livability (environs with nature as an active component), and Affordable design/construction with energy efficiency in mind .. on a large enough scale to benefit the public ! There is, for all practical purposes none of that to be had. As it currently stands, you have to be richer than God to do ANYTHING other than the unimaginative and wasteful development that has been built up to this point.
So instead of "Where's My flying car??" .. the question might now more accurately be "Where's My passive solar, earthen-berm, strawbale, rammed-earth, or cob house/apartment???"

super extra , March 18, 2019 at 3:45 pm

4. The speculative nature of the housing market

to expand and maybe add onto this, AirBnb/vacation rentals + rental 'business as income' (at institutional eg Berkshire Hathaway and the associated securitized offerings as well as individuals and small biz creating the 'income stream' via LLC pass through) is a major driver affecting the speculation. What happened to all the foreclosures from a decade ago? They were turned into rentals, they still exist.

I am all for an affordable housing mandate, but not in an Obamacare fashion by building tons more housing at crappy inflated prices with some means-tested voucher all so the rentiers can keep their profits. Destroy the rentiers and make housing right, make it a policy that is enforced with regulations and limits on numbers of rental units.

Jerry B , March 18, 2019 at 6:49 pm

Thanks Super.

==AirBnb/vacation rentals + rental 'business as income' (at institutional eg Berkshire Hathaway and the associated securitized offerings as well as individuals and small biz creating the 'income stream' via LLC pass through) is a major driver affecting the speculation===

To your point there was a recent article on NC that discussed your comment above.

https://www.nakedcapitalism.com/2018/08/wolf-richter-comes-second-wave-big-money-buy-rent-scheme.html

Across the street from the townhouse subdivision where my wife and I live is a subdivision of $275K – $350K houses. One of the more expensive houses was sold a year ago to a company that uses it for a rental.

I talked to the previous owner frequently while walking our dog, and he sold the house after it had been on the market for only about a month. As far as the previous owner was concerned the house sold for close to his asking price so he was happy. He had no concern about selling the house to a company that was going to use it for a rental. The previous owner had been living in that house in that neighborhood for 25 years and seemed to know most everybody in his subdivision. He and his wife raised their two sons in that house and also put a lot of time and effort into the landscaping around the house.

The rental company that bought the house does the absolute minimal landscaping of the house and barely mows the lawn on a semi regular basis. The company clearly does not have any regard for the "appearance" of the house or the neighborhood. Which is a shame because the other houses near it are well maintained which, due to the lack of landscape maintenance, makes the "rental company" house an eyesore as far as grass, weeds, etc. are concerned.

I do not begrudge the previous owner for selling to the rental company. His asking price was met so he was happy. And in the last few years, other houses in that subdivision have taken 1-2 years to sell. What I have an issue with is these vulture rental companies acting as mercenaries and treating houses and the neighborhood as so much fodder on a balance sheet.

One could also make the argument that without the rental company sticking it's nose where it does not belong, the (ahem, cough, cough) free market would have been allowed to work somewhat. By that I mean if this particular house had also taken a long time to sell like the others in that neighborhood, and had subsequent price reductions in order to sell it, then maybe the average housing price in that neighborhood/town/suburb would have gone down helping affordability.

justsayknow , March 18, 2019 at 11:03 am

From the Business Insider published today:

"In fact, the typical CEO made a whopping 312 times their median employees' salary in 2017, according to the Economic Policy Institute."

Note that is vs median salary not lowest paid.

The self serving disconnect between the management class and labor class is truly amazing.

Work is not valued. And the contribution to productivity is extracted and given to ownership. It's not income inequality we should emphasize but simple fairness. Let's call it Income Fairness.

anon y'mouse , March 18, 2019 at 11:35 am

"fairness" is too vague and insubstantial a concept around which to base any kind of rights, much less what some should get or we should do as a society.

we once thought it was "fair" as a society to enslave people. after we stopped that (and not because it wasn't "fair", but as a political move), we thought it was "fair" to continue to deny them many of their rights because they weren't "white".

huge numbers of us still think it is fair that people die from various issues caused by their "unwillingness to work" or "unwillingness to work smarter". how many times do people say "if you don't get more education, you can just shut up about earning enough to live on. working at McDonald's, you are slacking and therefore can not demand anything. go to school, fool!" people argue all of the time that a "living wage" is not fair, because a person who does low-value jobs isn't making enough money for their employer to justify the wage (basically, profit produced by that employee would either be nil or zero). and that is perfectly "fair" to these arguers.

fair is the idea that some deserve more and some less, due to something being "earned" by someone. it is a nice idea to teach children. real world morality is much more complicated than that, and a society of justice and laws and policies and bureaucracies can not be based around that. waaay too nebulous, and open to interpretation. everyone -knows what "fair" is- when they see it, because everyone's definition of "fairness" is different. as some kind of lofty ideal, it is fine. in practice, it is meaningless.

Robin Kash , March 18, 2019 at 11:57 am

Is this simply a Rip van Winkle account of the middle-class situation that has been well-reported and vigorously commented upon for some time? What am I missing?

ambrit , March 18, 2019 at 12:32 pm

The shift came when ol' Rip realized that the rumbling sound he heard was not the sound of the ghostly sailors bowling but the sound of distant cannon fire.

Another Amateur Economist , March 18, 2019 at 2:04 pm

The middle class stands upon the floor provided by the working class. And that floor is failing, as the human capital of society is gradually, but with increasing rapidity, plundered, from the bottom up.

The poor used to have more than they do now, and be less dependent on government redistributions of income.

Even the middle class owns less productive capital, as the small business owners who used to populate the main streets of American towns have been driven out of business by the Walmarts. Those businessmen were the social elites of their communities, giving those communities leadership, shape, structure and dimension.

Owning less productive capital, their communities pretty much hollowed out, the middle class have lost much of their self sufficiency, and have become increasingly dependent on the whims of distant oligarchs. First the Walmarts. Now the Amazons. And there will be even fewer resources available to support the necessary services local communities provide.

The middle class are right to be afraid. The distant oligarchs and their bankers will only allow so much debt before they pull out the rug.

Too bad no one paid attention what was happening to the working poor. Long ago, the 1% used to command 7% of the nation's income. Now they command 21%. That 14% had to come from someone.

rd , March 18, 2019 at 2:22 pm

With almost 40 years of work under my belt, I have been passing along some advice to my kids to help them navigate the current "middle class conundrums":

1. Owning a home is unlikely to make you wealthy. With just a few major city core exceptions, don't expect it to go up by more than inflation over the decades. So buy or rent just what you need and do real analysis of what you need and why.

2. Only live in a big expensive city if you need to for your chosen career. The smaller cities have a lot of opportunity for people with good work habits, even in the "Rust Belt" and the living costs are far lower.

3. College degrees are useful. Getting them with large debt loads is a bad idea though. Don't take on more student debt than about 2/3 of your expected starting salary for a four year degree and take on little or not debt for a 2-year degree.

4. Going to a name-brand school is worthwhile if you don't have to rack up significant extra debt. Otherwise, pick college and university by major and cost. Your internal traits make a far bigger difference than the school you went to.

5. Only go to graduate school if your desired career path requires it. Otherwise, you are losing years of earning power while incurring costs and debt. If you want a grad degree just for the joy of it, do it as night school as a hobby.

6. Start a Roth IRA with monthly contributions early, even if it is only $50/month. It builds habits and over the years will likely ensure you are in the top 25% in assets.

7. We are in a golden age of investing right now compared to 30 years ago. You can have worldwide, multi-asset class diversified investments at an annual expense ratio of 0.25% which was unheard of at the beginning of my career. So inexpensive Target Date funds or similar vehicles from companies like Vanguard mean you can do fire-and-forget investing while you focus on the rest of your life.

8. Don't assume the full value of a company or state pension will be there when you retire. These are rife with deliberate and accidental mismanagement and partial defaults are likely with many of them. Instead save so that you are not reliant on them for a basic acceptable standard of living.

8. You don't need financial advisors for investing, just to help you with personal finance instead. But that is not what they are usually selling, so 99% of the purported financial advisors are to be avoided as they are hazardous to your finances.

10. Try to get a positive cash flow in your life as early as possible to dramatically reduce stress. That is difficult if you have kids, large student loans, or large mortgage/rent costs, so those are the big decisions you need to make on life-finance balance.

Regarding Social Security, it is currently structured to provide 75% to 80% of its current benefits starting in 2034. That is still a significant safety net, but would require Congress to act to get it back to around 100%.

Medicare is just part and parcel of the US healthcare cost issues. If the US can get down to less than 14% of GDP in healthcare expenditures while providing universal coverage, then the Medicare/Medicaid funding issue effectively goes away. This is not impossible as the US is the only developed country that is above 14%.

rc , March 18, 2019 at 4:01 pm

Elizabeth Warren had a good speech at UC-Berkeley. She focused on the middle class family balance sheet and risk shifting. Regulatory policies and a credit based monetary system have resulted in massive real price increases in inelastic areas of demand such as healthcare, education and housing eroding purchasing power. Further, trade policies have put U.S. manufacturing at a massive disadvantage to the likes of China, which has subsidized state-owned enterprises, has essentially slave labor costs and low to no environmental regulations. Unrestrained immigration policies have resulted in a massive supply wave of semi- and unskilled labor suppressing wages.

Recommended initial steps to reform:
1. Change the monetary system-deleverage economy with the Chicago Plan (100% reserve banking) and fund massive infrastructure lowering total factor costs and increasing productivity. This would eliminate
2. Adopt a healthcare system that drives HC to 10% to 12% of GDP. France's maybe? Medicare model needs serious reform but is great at low admin costs.
3. Raise tariffs across the board or enact labor and environmental tariffs on the likes of China and other Asian export model countries.
4. Take savings from healthcare costs and interest and invest in human capital–educational attainment and apprenticeships programs.
5. Enforce border security restricting future immigration dramatically and let economy absorb labor supply over time.

Video of UC-B lecture:
https://www.youtube.com/watch?v=akVL7QY0S8A&feature=youtu.be

Jerry B , March 18, 2019 at 5:26 pm

As I have said in other comments, I like Liz Warren a lot within the limits of what she is good at doing (i.e. not President) such as Secretary of the Treasury etc. And I think she likes the media spotlight and to hear herself talk a little to much, but all quibbling aside, can we clone her??? The above comment and video just reinforce "Stick to what you are really good at Liz!".

I am not a Liz Warren fan boi to the extent Lambert is of AOC, but it seems that most of the time when I hear Warren, Sanders, or AOC say something my first reaction is "Yes, what she/he said!".

[Mar 18, 2019] College-entrance-exam cheating scandal exposes corrupt aristocracy (Video)

Mar 18, 2019 | theduran.com

RT CrossTalk host Peter Lavelle and The Duran's Alex Christoforou take a quick look at the college admissions scam revolving around William Rick Singer, who was running a for-profit college-counseling program, where according to federal prosecutors, has a goal focused on helping "the wealthiest families in the U.S. get their kids into school."

Arrest warrants for Hollywood stars, Lori Loughlin and Felicity Huffman, were delivered on Tuesday following their alleged involvement in a college-entrance-exam cheating scandal.

According to CNN, the women were two of around 50 people who were the subject of federal indictment following an extensive FBI investigation named "Operation Varsity Blues."

Loughlin's husband, Mossimo Giannulli, was also implicated, and was arrested early on Tuesday morning.

TMZ reported that Huffman was arrested by seven armed FBI agents. Her husband, William H. Macy, has not been charged in connection to the case. Loughlin, Giannulli, and Huffman are all facing charges of felony conspiracy to commit mail fraud and honest services mail fraud.

Huffman is accused of spending $15,000 on an organization that allegedly helped her daughter cheat on her SATs. Loughlin and Giannulli are accused of paying $500,000 to get their daughters into University of Southern California as recruits for the crew team for which neither of Loughlin's daughters rowed crew.

All three were recorded by the FBI on phone calls discussing their plans to alter or lie about their children's college applications.

https://www.youtube.com/embed/DCX35SWyrSU?version=3&rel=1&fs=1&autohide=2&showsearch=0&showinfo=1&iv_load_policy=1&wmode=transparent

Via Zerohedge


Is there anything left in this country that has not been deeply tainted by corruption?

By now you have probably heard that dozens of people have been arrested for participating in a multi-million dollar college admissions scam. Enormous amounts of money were paid out in order to ensure that children from very wealthy families were able to get into top schools such as Yale University, Stanford University, the University of Texas and the University of Southern California. And as The Economic Collapse blog's Michael Snyder writes, we should certainly be disgusted by these revelations, but we shouldn't be surprised. Such corruption happens every single day on every single level of society in America. At this point our nation is so far gone that it is shocking when you run into someone that actually still has some integrity.

The "mastermind" behind this college admissions scam was a con man named William Rick Singer. He had been successfully getting the kids of wealthy people into top colleges for years using "side doors", and he probably thought that he would never get caught.

But he did.

There were four basic methods that Singer used to get children from wealthy families into elite schools. The first two methods involved bribes

Bribing college entrance exam administrators to allow a third party to facilitate cheating on college entrance exams, in some cases by posing as actual students,' is the first.

Bribing university athletic coaches and administrators to designate applicants as purported athletic recruits – regardless of their athletic abilities, and in some cases, even though they did not play the sport,' is the second.

Because many of these kids didn't even play the sports they were being "recruited" for, in some cases Photoshop was used to paste their faces on to the bodies of real athletes

In order to get non-athletic kids admitted to college as athletes, Singer often had to create fake profiles for them. Sometimes this involved fabricating resumes that listed them having played on elite club teams, but to finish the illusion Singer and his team would also use Photoshop to combine photos of the kids with actual athletes in the sport.

A number of college coaches became exceedingly wealthy from taking bribes to "recruit" kids that would never play once they got to school, but now a lot of those same coaches are probably going to prison.

The third and fourth methods that Singer used involved more direct forms of cheating

'Having a third party take classes in place of the actual students, with the understanding that the grades earned in those classes would be submitted as part of the students' application,' is the third.

The fourth was 'submitting falsified applications for admission to universities that, among other things, included the fraudulently obtained exam scores and class grades, and often listed fake awards and athletic activities.'

Of course the main thing that the media is focusing on is the fact that some celebrities are among those being charged in this case, and that includes Lori Loughlin from "Full House"

It was important to "Full House" star Lori Loughlin that her kids have "the college experience" that she missed out on, she said back in 2016.

Loughlin, along with "Desperate Housewives" actress Felicity Huffman, is among those charged in a scheme in which parents allegedly bribed college coaches and insiders at testing centers to help get their children into some of the most elite schools in the country, federal prosecutors said Tuesday.

Despite how cynical I have become lately, I never would have guessed that Lori Loughlin was capable of such corruption.

After all, she seems like such a nice lady on television.

But apparently she was extremely determined to make sure that her daughters had "the college experience", and so Loughlin and her husband shelled out half a million dollars in bribes

Loughlin and Giannulli 'agreed to pay bribes totaling $500,000 in exchange for having their two daughters designated as recruits to the USC crew team – despite the fact that they did not participate in crew – thereby facilitating their admission to USC,' according to the documents.

As bad as this scandal is, can we really say that it is much worse than what is going on around the rest of the country every single day?

Of course not.

We are a very sick nation, and we are getting sicker by the day.

William Rick Singer had a good con going, and he should have stopped while he was ahead

William "Rick" Singer said he had the inside scoop on getting into college, and anyone could get in on it with his book, "Getting In: Gaining Admission To Your College of Choice."

"This book is full of secrets," he said in Chapter 1 before dispensing advice on personal branding, test-taking and college essays.

But Singer had even bigger secrets, and those would cost up to $1.2 million.

But like most con men, Singer just had to keep pushing the envelope, and in the end it is going to cost him everything.

The ironic thing is that our colleges and universities are pulling an even bigger con. They have convinced all of us that a college education is the key to a bright future, but meanwhile the quality of the "education" that they are providing has deteriorated dramatically. I spent eight years in school getting three degrees, and so I know what I am talking about. For much more on all this, please see my recent article entitled "50 Actual College Course Titles That Prove That America's Universities Are Training Our College Students To Be Socialists" .

I know that it is not fashionable to talk about "morality" and "values" these days, but the truth is that history has shown us that any nation that is deeply corrupt is not likely to survive for very long.

Our founders understood this, and former president John Adams once stated that our Constitution "was made only for a moral and religious people"

Avarice, ambition, revenge and licentiousness would break the strongest cords of our Constitution, as a whale goes through a net. Our Constitution was made only for a moral and religious people. It is wholly inadequate to the government of any other.

Today, we are neither moral or religious.


What we are is deeply corrupt, and America will not survive if we keep going down this path.

[Mar 18, 2019] A Recession Is Coming, And Maybe a Bear Market, Too by Gary Shilling

My be so, but it looks like Trump is adamant to keep stocks high flying. Such a S&500 promoter in chief...
Mar 18, 2019 | finance.yahoo.com

I first suggested the U.S. economy was headed toward a recession more than a year ago, and now others are forecasting the same. I give a business downturn starting this year a two-thirds probability.

The recessionary indicators are numerous. Tighter monetary policy by the Federal Reserve that the central bank now worries it may have overdone. The near-inversion in the Treasury yield curve. The swoon in stocks at the end of last year. Weaker housing activity. Soft consumer spending. The tiny 20,000 increase in February payrolls, compared to the 223,000 monthly average gain last year. Then there are the effects of the deteriorating European economies and decelerating growth in China as well as President Donald Trump's ongoing trade war with that country.

There is, of course, a small chance of a soft landing such as in the mid-1990s. At that time, the Fed ended its interest-rate hiking cycle and cut the federal funds rate with no ensuing recession. By my count, the other 12 times the central bank restricted credit in the post-World War II era, a recession resulted.

It's also possible that the current economic softening is temporary, but a revival would bring more Fed restraint. Policy makers want higher rates in order to have significant room to cut in the next recession, and the current 2.25 percent to 2.50 percent range doesn't give them much leeway. The Fed also dislikes investors' zeal for riskier assets, from hedge funds to private equity and leveraged loans, to say nothing of that rankest of rank speculations, Bitcoin. With a resumption in economic growth, a tight credit-induced recession would be postponed until 2020.

"Recession" conjures up specters of 2007-2009, the most severe business downturn since the 1930s in which the S&P 500 Index plunged 57 percent from its peak to its trough. The Fed raised its target rate from 1 percent in June 2004 to 5.25 percent in June 2006, but the main event was the financial crisis spawned by the collapse in the vastly-inflated subprime mortgage market.

Similarly, the central bank increased its policy rate from 4.75 percent in June 1999 to 6.5 percent in May 2000. Still, the mild 2001 recession that followed was principally driven by the collapse in the late 1990s dot-com bubble that pushed the tech-laden Nasdaq Composite Index down by a whopping 78 percent.

The 1973-1975 recession, the second deepest since the 1930s, resulted from the collapse in the early 1970s inflation hedge buying of excess inventories. That deflated the S&P 500 by 48.2 percent. The federal funds rate hike from 9 percent in February 1974 to 13 percent in July of that year was a minor contributor.

The remaining eight post-World War II recessions were not the result of major financial or economic excesses, but just the normal late economic cycle business and investor overconfidence. The average drop in the S&P 500 was 21.2 percent.

At present, I don't see any major economic or financial bubbles that are just begging to be pricked. The only possibilities are excess debt among U.S. nonfinancial corporations and the heavy borrowing in dollars by emerging-market economies in the face of a rising greenback. Housing never fully recovered from the subprime mortgage debacle. The financial sector is still deleveraging in the wake of the financial crisis. Consumer debt remains substantial but well off its 2008 peak in relation to household income.

Consequently, the recession I foresee will probably be accompanied by about an average drop in stock prices. The S&P 500 fell 19.6 percent from Oct. 3 to Dec. 24, but the recovery since has almost eliminated that loss. A normal recession-related decline of 21.2 percent – meeting the definition of a bear market – from that Oct. 3 top would take it to 2,305, down about 18 percent from Friday's close, but not much below the Christmas Eve low of 2,351.

A. Gary Shilling is president of A. Gary Shilling & Co., a New Jersey consultancy, a Registered Investment Advisor and author of "The Age of Deleveraging: Investment Strategies for a Decade of Slow Growth and Deflation." Some portfolios he manages invest in currencies and commodities.


The_Mick, 9 hours ago

"I first suggested the U.S. economy was headed toward a recession more than a year ago, and now others are forecasting the same."
And yet you were WRONG a year ago! You don't get excused for last year just because you're still predicting it!

Of course a recession is coming - maybe this year but maybe not for 10 years. Recessions happen from time to time but they are not predictable because economics has too many variables we can't quantify.

And do you think you're impressing anyone by adding "maybe a bear market too"???

What do you mean "maybe"? If there's a recession then, of course, our slightly overpriced market will experience a bear market! DUH! Terry7 hours ago I expected a deeper understanding from My Shilling. This article seems very week. If he had submitted it as an an economic paper I don't think he would get high marks. Many historical economic facts glossed over or omitted. Terrible job of describing the causes of the early 1970s world recession . As for a recession without a bear market.....? Don't make me laugh.... And buy the way we are already in a bear market !

This decade is a lot like the 1990s in that it has been a nice long run. But no business cycle goes on for every. It's just does not work like that because it is cycle in nature. After a ten year run in stocks it is less risky for serious money to be out of them that in them. That is why the bond market is so solid right not. Because it's not work risking all your cash for maybe a couple more percent when you have already make 300% or more..

The western economies are just running off free or very cheap money being constantly pumped into investment assets by the central banks. There are no real guts to them. USA, EU and Japan have been running the printing presses with abandonment. At the same time China and India are becoming the industrial power houses because they had over one billion people who will work for next to nothing.

Because every investment asset is pumped up of "free" money in the form of very low interest rate loans from the FED etc. Things are very fragile. And someone has give Powel this "reality check". So the FED does a 180 on policy and now looks like a Wall St poodle. And they speculators have gone back to pumping FANG stocks

But they all know this market is very pumped up and fragile. And they all keep their stop loss triggers very tight. That is why it falls so dramatically when it takes a hit. Like OMG the FED funds rate going from 2.75% to 3.00% !! So tread very carefully . The cracks are all around

Salo, 7 hours ago

I am only surprised when I read that another recession is not coming.

Almost 10 years since the "end" of the Great Recession, and all it took was $22 Trillion of borrowed money, a $4 Trillion in the red Fed balance sheet and interest rates just barely north of 2%. Oh, and one big beautiful corporate tax cut. Who knew expansionary economies were so uncomplicated?

Ricardo, 6 hours ago

I remember reading Gary Shilling's articles a few years after the Crash of 2009 when he attempted to prove without a doubt that market returns would be sub-par for decades to come. He was wrong and you would have missed out on the longest and biggest bull market in history. Be wary of what Gary has to tell you.

[Mar 18, 2019] The Boeing debacle is the latest example of regulatory capture by D. Saint Germain

Mar 15, 2019 | medium.com

How the Boeing 737 Max grounding and the Genoa bridge collapse show us that allowing companies to self-certify the safety of their products can be deadly

On Wednesday the United States joined 42 other countries in grounding Boeing's 737 Max 8 jets, days after a crash in Ethiopia of a 737 Max 8 jet left 157 people dead. The United States was a holdout, taking days longer to ground the planes than most of Europe. Our Federal Aviation Administration (FAA) said, in those days between, that they weren't grounding the planes because " the agency's own reviews of the aircraft show no 'systematic performance issues.' "

There were some conflicting accounts of exactly how the US came to ground the 737 Max 8. A statement from Boeing on Wednesday read that "Boeing has determined  --  out of an abundance of caution and in order to reassure the flying public of the aircraft's safety  --  to recommend to the FAA the temporary suspension of operations of the entire global fleet of 371 737 MAX aircraft."

In other words, Boeing claimed it was their idea / recommendation that the FAA ground the aircraft. Meanwhile, Donald Trump declared that he grounded the aircraft by executive order, forcing the FAA's hand.

Which begs the question  --  why did it take a presidential decree and/or the company itself to get the FAA, the main agency responsible for overseeing airplane transit in the United States, to ground potentially dangerous aircraft?

As James Hall, the former National Transportation Safety Board chairman, explained in the Times , in 2005 the FAA turned its safety certification responsibilities over to the manufacturers themselves (if manufacturers met some requirements). In plain speak, this means that Boeing got to decide if Boeing's airplanes were safe enough to fly  --  with no additional third-party checks.

The FAA said the purpose of this change was to save the aviation industry roughly $25 billion between 2006 to 2015.

Given this, it makes you wonder if the statement on Tuesday by Acting FAA Administrator Daniel K. Elwell  --  that the agency had conducted its own review  --  was factual, or if the agency had simply reviewed the safety review that Boeing had conducted on itself. It also clarifies why Boeing came to recommend to the FAA that their planes be grounded, rather than the FAA taking any decisive action on their own.

The term for this maze, where a government safety agency allows an industry to regulate itself so the industry can save some money , and where the industry itself has to be the one to recommend to government that their product shouldn't be in operation pending investigation, is regulatory capture .

From Wikipedia : "Regulatory capture is a form of government failure which occurs when a regulatory agency, created to act in the public interest, instead advances the commercial or political concerns of special interest groups that dominate the industry or sector it is charged with regulating."

The issue, in short, is that it is rarely in a business' self-interest to ensure the absolute safety of their products. Safety testing takes time, money, and if inspections reveal problems that need fixing, more money. Corporations are profit maximizers and pursue whatever method they need to minimize cost (including minimizing fixing flaws in their products) and maximize profit.

Without the threat of outside inspection or serious repercussions, there are few incentives to fix potential problems. Insurance covers accidents, and most mega-corporations have funds set aside in their operating budgets to pay the (generally small, relative to their operating budgets) fines governments may impose if and when a problem is discovered.

This is why it is unlikely that industry will ever sufficiently regulate itself on safety issues. Remember Edward Norton's job in "Fight Club"? "The car crashes and burns with everyone trapped inside. Now, should we initiate a recall? Take the number of vehicles in the field, A. Multiply it by the probable rate of failure, B. Multiply the result by the average out-of-court settlement, C. A x B x C equals X. If X is less than the cost of a recall, we don't do one."

The United States isn't alone in turning over self-certification of its transportation and infrastructure to industry. The Genoa Bridge Collapse in Italy last year, in which 43 people died, is another case.

The Morandi Bridge is a privately-owned toll bridge, publicly built but later sold off to Autostrade, a company majority owned by the Benetton clothing family. As a private infrastructure company, Autostrade has a profit maximization goal of keeping bridge maintenance costs low and toll profits high. Thanks to further privatization efforts of the Italian government, the safety and inspection of bridges is also conducted by private companies. In the case of the Morandi Bridge, the inspection company responsible for safety checks and certification of the bridge was owned by Autostrade's parent company, leaving the company that owns the bridge to self-certify its safety. The result, as the world saw, was a bridge that collapsed.

As Texas engineer Linwood Howell said in the Times, "the engineers inspecting the bridge would have their own professional liabilities to worry about, including the profits of the company that was paying them," i.e. a clear conflict of interest between maintaining basic safety and ensuring their own jobs.

Meanwhile, as Italian law professor Giuliano Fonderico noted , "the government behaved more like its first priority was cooperating with Autostrade, rather than regulating it."

These current examples of regulatory capture are the latest in a series of examples from recent times; others have pointed to regulatory capture in the Federal Reserve during the economic crisis , and the Mineral Management Service during the BP Oil Spill , to name two. Unfortunately it is only when a tragedy occurs that the public expresses concern.

George Stigler, who received the Nobel Peace Prize in Economics in part for his work around regulatory capture in 1982, believed that it was likely that industry would come to dictate the regulatory issues within their industries because of personal connections, a greater understanding of issues facing industry than the general public, but mostly, a public ignorance around what their regulators are up to.

Perhaps it is time for people to pay a little more attention to what our regulators, who we pay to protect us from bridge collapses and plane crashes, are up to. There are some people with big ideas on fixes for regulatory capture, but public demand will also need to exist for real reform efforts to take place.

[Mar 18, 2019] Countries that have reported their January production

Mar 18, 2019 | peakoilbarrel.com

Energy News, says: 03/17/2019 at 2:49 am

Countries that have reported their January production (shown on the chart)
OPEC14 -822
Alberta -268
Mexico -87
Russian Federation -78
Brazil -60
Norway -48
Total -1,429 kb/day
Chart https://pbs.twimg.com/media/D12BlLBW0AEDR6G.png

So far for February: Russia, OPEC14, Norway
Total: -330 kb/day

Chart for December which includes the big increases from the USA
https://pbs.twimg.com/media/D12IDSNW0AE18u1.png

China crude oil production
February: 3,813 kb/day
Average 2018: 3,788 kb/day
https://pbs.twimg.com/media/D12PhtXWsAALxTw.png

[Mar 16, 2019] If we assume average EROEI equal 2 for shale oil then rising shale oil production with almost constant world oil production is clearly a Pyrrhic victory. Again, putting a single curve for all types of oil is the number racket, or voodoo dances around the fire.

Mar 16, 2019 | peakoilbarrel.com

likbez says: 03/16/2019 at 9:34 pm

likbez says:

03/16/2019 at 9:34 pm

Some arguments in defense of Ron estimates

1. When something is increasing 0.8% a year based on data with, say, 2% or higher margin of error this is not a growth. This is a number racket.

2. We need to use proper coefficients to correctly estimate energy output of different types of oil We do not know real EROEI of shale oil, but some sources claim that it is in the 1.5-4.5 range. Let's assume that it is 3. In comparison, Saudi oil has 80-100 range. In this sense shale oil is not a part of the solution; it is a part of the problem (stream of just bonds produced in parallel is the testament of that). In other words, all shale oil is "subprime oil," and an increase of shale oil production is correctly called the oil retirement party. The same is true for the tar sands oil.

So the proper formula for total world production in "normalized by ERORI units" might be approximated by the equation:

0.99* OPEC_oil + 0.97*other_conventional_oil + 0.95*shallow-water_oil + 0.9*deep_water_oil +0.75*(shale_oil+condensate) + 0.6*tar_sand_oil + 0.2*ethanol

where coefficients (I do not claim that they are accurate; they are provided just for demonstration) reflect EROEI of particular types of oil.

If we assume that 58% of the US oil production is shale oil and condensate then the amount of "normalized" oil extracted in the USA can be approximated by the formula

total * 0.83

In other words 17% of the volume is a fiction. Simplifying it was spent on extraction of shale oil and condensate (for concentrate lower energy content might justify lower coefficient; but for simplicity we assume that it is equal to shale oil).

Among other things that means that 1970 peak of production probably was never exceeded.

3. EROEI of most types of oil continues to decline (from 35 in 1999 to 18 in 2006 according to http://www.euanmearns.com/wp-content/uploads/2016/05/eroeihalletal.png). Which means that in reality physical volume became a very deceptive metric as you need to sink more and more money/energy into producing every single barrel and that fact is not reflected in the volume. In other words, the barrel of shale oil is already 50% empty when it was lifted to the ground (aka "subprime oil"). In this sense, shale wells with their three years of the high producing period are simply money dumping grounds for money in comparison with Saudi oil wells.

4. The higher price does not solve the problem of the decline of EROEI. It just allows the allocation of a larger portion of national wealth to the oil extraction putting the rest of the economy into permanent stagnation.

5. If we assume average EROEI equal 3 (or even 5) for shale oil then rising shale oil production along with almost constant world oil production is clearly a Pyrrhic victory. Again, putting a single curve for all types of oil is the number racket, or voodoo dances around the fire.

NOTES:

1. IMHO Ron made a correct observation about Saudi behavior: the declines of production can well be masked under pretention of meeting the quota to save face. That might be true about OPEC and Russia as a whole too. Exceptions like Iraq only confirm the rule.

2. EROEI of lithium battery is around 32

[Mar 16, 2019] Martin Wolf Why Economists Failed as "Experts" -- and How to Make Them Matter Again

That's what neoliberal bottomfeeders like Summers, Krugman and Dejong should read and memorize
Notable quotes:
"... Neoclassical economics became important in large measure to show that markets delivered efficient outcomes, and efficiency was seen as tantamount to socially desirable. That's before considering that highly efficiency almost always comes at the expense of safety and robustness, and that efficient solutions may not be equitable. ..."
"... So, maybe the proper distinction to be made is between "trustworthy" experts and "untrustworthy" ones. The question then become what makes experts trustworthy -- not, I should stress, intrinsically trustworthy, but rather perceived by the public to be so. ..."
"... The third point is that trust in expertise seems to be quite generally declining. This is partly perhaps because education is more widespread, which makes possession of an education appear in itself less authoritative. It is also partly because of the rapid dissemination of information. It is partly because of the easy formation of groups of the disaffected and dissemination of conspiracy theories. The internet and the new social media it has spawned have turned out to be powerful engines for the spreading of disinformation aimed at manipulation of the unwary. ..."
Mar 14, 2019 | www.nakedcapitalism.com
Yves here. Even though Martin Wolf's post makes many important observations, I feel the need to take issue with his conclusion. Economists have been and continue to be enormously successful as experts. PhDs in economics make roughly twice as much as those in other social sciences. Economists are the only social scientists to have a seat at the policy table. And they continue to do so, despite their colossal failure in the global financial crisis, with no serious change in the discipline and no loss of reputation of any prominent economists.

Neoclassical economics became important in large measure to show that markets delivered efficient outcomes, and efficiency was seen as tantamount to socially desirable. That's before considering that highly efficiency almost always comes at the expense of safety and robustness, and that efficient solutions may not be equitable.

The importance of economists as policy advisers grew in the post World War II era, after the USSR managed the impressive feat of industrializing in the 20th century. US officials were concerned that a command and control economy could beat a messy, consumer oriented capitalist one, and turned to economists to give guidance on how to achieve high growth rates so as to produce enough guns and butter.

As for the specific impetus for Wolf's article, it appears to be due to voters ignoring the dire warnings made by the Remain campaign during the Brexit referendum campaign that Brexit would have large economic costs. But based on reports after the vote came in, that repudiation came not just because the public might well have good reason not to believe economists as a result of the crisis, but how the Remain campaign carried itself in the debates. That side apparently made arrogant-seeming, data heavy arguments, while the Leavers made stirring appeals about sovereignty .a UK version of MAGA.

By Martin Wolf, Associate Editor and Chief Economics Commentator, Financial Times. Originally published at the Institute for New Economic Thinking website

"I think people in this country have had enough of experts."
-Michael Gove

Michael Gove, winner of the Brexit referendum (though loser in the game of politics, having failed to become leader of his party, and so, maybe, no true expert either) hit the nail on the head. The people of this country have, it seems, had enough of those who consider themselves experts, in some domains. The implications of this rejection of experts seem enormous. That should be of particular significance for economists, because economists were, after all, the "experts" against whom Mr. Gove was inveighing.

Yet it is not really true that the people of this country have had enough of experts. When they fall ill, they still go to licensed doctors. When they fly, they trust qualified pilots. When they want a bridge, they call upon qualified engineers. Even today, in the supposed "post-fact" world, such people are almost universally recognized as experts.

So, maybe the proper distinction to be made is between "trustworthy" experts and "untrustworthy" ones. The question then become what makes experts trustworthy -- not, I should stress, intrinsically trustworthy, but rather perceived by the public to be so.

One might make three, admittedly speculative, points about this distinction between experts deemed by the public to be deserving of trust and those who are not.

The first is that some forms of expertise appear simply to be more solidly based than others in a body of theory and/or evidence, with recognizable successes to their credit. By and large, doctors are associated with cures, pilots with keeping airplanes in the sky and engineers with bridges that stay up. Such successes -- and there are many other comparable fields of expertise -- self-evidently make people with the relevant expertise appear trustworthy.

The second is that some forms of expertise are more politically contentious than others. Nearly everybody, for example, agrees that curing people, flying airplanes and building bridges are good things. Social and political arrangements -- and economics is inescapably about social and political arrangements -- are always and everywhere contentious. They affect not only how people think the human world works, but also how it ought to work. These forms of expertise are about values.

The third point is that trust in expertise seems to be quite generally declining. This is partly perhaps because education is more widespread, which makes possession of an education appear in itself less authoritative. It is also partly because of the rapid dissemination of information. It is partly because of the easy formation of groups of the disaffected and dissemination of conspiracy theories. The internet and the new social media it has spawned have turned out to be powerful engines for the spreading of disinformation aimed at manipulation of the unwary.

It might be encouraging for economists that they are not the only experts who are mistrusted. Consider the anti-vaccination movement, hostility to evolutionary theory, or rejection of climate science. All these are the products of doubts fueled by a combination of core beliefs and suspicion of particular forms of expertise. The anti-vaccination movement is driven by parents' concerns about their children. The hostility to evolution is driven by religion. The rejection of climate science is clearly driven by ideology. Every climate denier I know is a free marketeer. Is this an accident? No. The desire to believe in the free market creates an emotional justification for denying climate science. In principle, after all, belief in free markets and in the physics of the climate system have absolutely nothing to do with each other.

So economists are in good company with other forms of politically or socially contentious expertise. But they have a special difficulty. Not only are they engaged in an essentially controversial, because political, arena, and so also an inherently ideological one, but they suffer to a high degree from the first point I made above: their "science", if science it is, just does not look to the public to be solidly based. It does not work as well as the public wants and economists have claimed. Economists claim a certain scientific status. But much of it looks to the outsider more like "scientism" -- the use of an incomprehensible intellectual apparatus to obscure ignorance rather than reveal truth.

This does not mean that economists don't know useful things. It is quite clear that they do. Markets are extraordinary institutions, for example. Economists' elucidation of markets or of the principle of comparative advantage is a great intellectual achievement. Yet suspicion of economics and economists is both long-standing and understandable.

The problem became far more serious after the financial crisis. The popular perception is that the experts -- macroeconomists and financial economists -- did not appreciate the dangers before the event and did not understand the longer-run consequences after it. Moreover, the popular perception seems to be in large part correct. This has damaged the acceptance of the expertise of economists to a huge extent.

So how, in this suspicious contemporary environment, might economists persuade the public they are experts who deserve to be listened to?

I decided to ask my colleagues this question. One answered that:

1. Good economists have a clear (if incomplete) understanding of how the world works. This is a pre-requisite to making it a better place.

2. Economists have a sense of scale. They understand the difference between big and small and how to make that distinction. This is vital for policy.

3. Economics is all about counterfactuals. It understands the relevant comparators even if they are difficult to work out.

4. Economists are experts on incentives and motivations and empirically try to measure them rather than relying on wishful thinking.

5. Generally, good economists are expert in understanding the limits of their knowledge and forecasting abilities.

Another colleague added:

The general public usually associate economists with:
-A small set of macroeconomic forecasts (growth, inflation mainly), and
-A belief that markets always produce perfect outcomes

And they attribute failure to them if either:
-point forecasts (inevitably) prove wrong, or
-markets produce some bad outcomes

Whereas the expertise of economists is really in the building blocks that enable you to construct sensible forecasts and to understand how people are likely to behave and respond to a given set of circumstances/policies. This structure for understanding the world allows economists to take on board new developments, understand whether they reflect a rejection of their existing theories or merely a (possibly tail) outcome that was consistent with their "model," and push forward their understanding of the world from there. Rather than throwing away all existing wisdom when circumstances change somewhat.

I agree with these propositions. Properly understood, economics remains very useful. One realizes this as soon as one is engaged with someone who knows nothing at all about the subject. But I still have four qualifications to make.

First, a large part of what economists actually do, namely forecasting, is not very soundly based. It would be a good idea if economists stated that loudly, strongly, and repeatedly. Indeed, there should be ceaseless public campaigning by the professional bodies, emphasizing what economists don't know. Of course, that would not -- as economists might predict -- be in their interests.

Second, in important areas of supposed economic expertise, the analytical basis is really weak. This is true of the operation of the monetary and financial systems. It is also true of the determinants of economic growth.

Third, economists are not disinterested outsiders. They are part of the political process. It is crucial to remember that certain propositions favor the interests of powerful people and groups. Economists can find themselves easily captured by such groups. "Invisible hand" theorems are particularly open to such abuse.

Finally, the division between economic aspects of society and the rest is, in my view, analytically unsound. The relationship between, say, economics and sociology or anthropology is not like that between physics and chemistry. The latter rests upon the former. But economics and anthropology lie side by side. I increasingly feel that the educated economist, certainly those engaged in policy, must also understand political science, sociology, anthropology, and sociology. Otherwise, they will fail to understand what is actually happening.

If I am right, the challenge is not just to purify economics of exaggerated claims, though that is indeed needed. It is rather to recognize the limited scope of economic knowledge. This does not mean there is no such thing as economic expertise: there is. But its scope and generality are more limited than many suppose.

Michael Gove was wrong, in my view, about expertise applied in the Brexit debate. But he was not altogether wrong about the expertise of economists. If we were more humble and more honest, we might be better recognized as experts able to contribute to public debate.

With this in mind, what should be the goal of an education in economics at the university level? A part of the answer will come from developments within the field. In time, the incorporation of new ideas and techniques may make the academic discipline better at addressing the intellectual and policy challenges the world now confronts.

Another part of the answer, however, must come from asking what an undergraduate education ought to achieve. The answer should not be to produce apprentices in a highly technical and narrow discipline taught as a branch of applied mathematics. For the great majority of those who learn economics, what matters is appreciation of both a few core ideas and of the complexity of the economic reality.

At bottom, economics is a field of inquiry and a way of thinking. Among its valuable core concepts are: opportunity cost, marginal cost, rent, sunk costs, externalities, and effective demand. Economics also allows people to make at least some sense of debates on growth, taxation, monetary policy, economic development, inequality, and so forth.

It is unnecessary to possess a vast technical apparatus to understand these ideas. Indeed the technical apparatus can get in the way of such an understanding. Much of the understanding can also be acquired in a decent, but not inordinately technical, undergraduate education. That is what I was fortunate enough to acquire in my own years studying philosophy, politics and economics at Oxford in the late 1960s. Today, I believe, someone with my background in the humanities would never become an economist. I am absolutely sure I would not have done so. It might be arrogant to make this claim. But I think that would have been a pity -- and not just for me.

In addition, it would be helpful to expose students to some of the heterodox alternatives to orthodox economics. This can only be selective. But exposure to the ideas of Hyman Minsky, for example, would be very helpful to anybody seeking to understand the macroeconomic implications of liberalized finance.

The teaching of economics to undergraduates must focus on core ideas, essential questions, and actual realities. Such a curriculum might not be the best way to produce candidates for PhD programs. So be it. The study of economics at university must not be seen through so narrow a lens. Its purpose is to produce people with a broad economic enlightenment. That is what the public debate needs. It is what education has to provide.


greg , March 14, 2019 at 1:14 am

I am afraid a worse problem with economists is that they don't seem interested in anyone's opinions except their own.

They even hold ecology in disdain, not having any interest in learning what is, in fact, the foundational system of their own 'science.' The booms and busts of capitalism show familiar patterns to ecologists. Why, ecologists even have equations for them!

But I guess ecology is just too simple for the attentions of economists : Stupid animals. They don't even use money! What kind of economy can that be?

So economists look for models everywhere except where to find them. The hubris of humanity, not needing to give due attention to the economies of 'animal' societies.

Sanxi , March 14, 2019 at 7:04 am

To Yves. Well, I nearly lack the heart to respond, but I feel I must. Taking yesterday's NC's lessons of looking at a human facing and having eye contact to remain human online, I now do both – a human sits next to me. I read aloud to her.

Ok, you are a strong advocate of becoming a certified economist. Because 1.they make a lot of money and 2. only they sit at the policy table.

Further claims made in your preamble: in no particular order of importance: something about efficient outcomes that may not be equitable; command & control and guns and butter; and sadly an analysis of Brexit voters in either camp.

(One exception to all that I say is those using MMT, certified, with a degree or not. Again something I first learned about on NC.)

Yesterday, somewhere in the NC collective was the notion that the above mentioned economists tell tho' we may be so out of balance with the world that our extinction as a species is a legitimate issue to discuss, that in the end there ain't any money to not only not fix the problem but not even deal with it. And these guys/gals you laud? I and others have argued this gang provided the intellectual nonsense that put us where we are now.

What is your point that Econ grads make the most amount of money compared to what? Philosophy majors? True or not I still say it's a waste of a life. Not the knowing, but the being of one. I don't see what value there is for civilization in general but specifically that just because they make a lot of money, it's good?

All social science grads you say v Econ grads make more money. I doubt that. Seems every school district requires a PhD in Education, and a PhD in Business is very lucrative (not saying useful, just pays well).

The policy table. I'm truly baffled as to what you refer. If they are the only ones at said table then it follows they are the only ones at it. In my long life I'm trying to think were we ever let an economist have the final say, or even a moderate say in any political, governmental, or military policy. Some input yes, but deterministic, no. If they were sitting at their own table, when asked they came to table with those that had the votes, give their opinion and then left. Sociological impact statements had far bigger influence on policy. And policy is no more then the data we can agree on to make decisions.

Sure, many governments, NGOs, multinationals all have jobs for economists but in someway this is self serving, not a necessity. Kuhn's book on "The Structure of Scientific Revolutions", does a good job of explain how authority gets established, vested, and in the end becomes useless. That it exists is not an argument that it is necessary or good. That there needs to be some way to define and explain things economic I no have issue with, that outside of MMT that is has been, using system theory I don't see it.

As to efficient outcomes that may not be equitable that speaks for itself. It doesn't. No 'may not' about it, said with respect.

As to command & control and guns and butter, seems like a long time ago. A long time ago, using science to help in making decisions was new and it took awhile to get it right, or at least to get it working.

(Small note, I have dual US & UK citizenships)

An analysis of Brexit voters in either camp. I can tell you why I voted the way I did but I need to make an appeal to Stephen Pinker's, "The Blank Slate". Either I have the free will to make a decision and accept responsibility for it or I don't. I believe I do and did. I voted to leave and yes their are economic impacts, as well as social, political, historical, psychological, and philosophical. As did in electing Trump. As did the 1776 revolution, as in the US Civil War, almost anything. Money is not everything nor the only thing. And the future isn't what it used to be. The Long Emergency is here.

skippy , March 14, 2019 at 7:15 am

Hayek liked banding around watery terms like freedom and liberty its when he stopped being an economist [political theory in times past] and jointed the ranks of ideologues .

Pay check included oops and health care .

Yves Smith Post author , March 14, 2019 at 1:17 pm

Boy are you shooting the messenger. I'm not saying the way the economics discipline has become influential is a good thing, but that is the way it is. How economics operates as a discipline is great for economists, so why should they change? So what if their prescription fail way too often? For instance, there haven't been any bad consequences to anyone who didn't see the crisis coming and (even worse) advocated bank deregulation, starting with Larry Summers (but he had plenty of company).

And you are simply wrong about the influence economists have. In the US, CBO budget scoring is fundamental to how Congress views various proposed programs, even though we have described how the CBOs methods are crap and the CBO operates as an a big enforcer of deficit hysteria (as in they play a politicized role). The Fed and other central banks, the most powerful single government economic actors, are all run by monetary economists. The IMF, another very powerful institution, has deeply embraced and implements neoliberal policies, namely, balanced budgets and squeezing labor (labor "reforms"). In the US, economists in op eds and even in Congressional testimony (see Bernanke for instance) argue for balanced budgets and argue the supposed necessity of cutting Social Security and Medicare and NEVER mention cutting military spending. They are acting not just as enforcers of overall spending, but by advocating what to cut, are influencing priorities.

Avery T , March 14, 2019 at 9:53 am

Back in my former life as an economist-in-training, I ran into ecological economics as a branch of natural resource economics. It was completely backwards – the extent ecological theory was brought in didn't extend beyond simple predator-prey-plant models, and the goal was to find the macroeconomic general equilibrium of biomass in the ecosystem.

That was probably just the most striking example of the institutional close-mindedness I saw back among the economists.

deplorado , March 14, 2019 at 3:08 am

Mr Wolf says, among the important concepts are "externalities" Like everything that supports economic activity. Economics reduces the real world to "externalities" and simple equations about things measured in crude tokens – money. How good can it be then.

Also, "Such a curriculum might not be the best way to produce candidates for PhD programs" – is that a goal in itself? Like, the world needs a certain amount of economics PhDs produced? What for?

Prof. Michael Hudson, Prof. Richard Wolff and others have long ago explained what's wrong with mainstream economics, but that can't be said in FT.

This reminds me of the party press during the Perestroika in the 80ies talking about reform in a similar soft and obfuscatory of the truth way, full of wishful recommendations, striking a demurely optimistic tone supposed to convey integrity. It was bullshit and when the real things started happening, everybody forgot about it, because it had no depth and no bearing on real life.

diptherio , March 14, 2019 at 10:40 am

It seems obvious to most people that not all values are commensurable with each other. For instance, things like literary and artistic quality, friendships, and human lives cannot defensibly be measured in dollar terms. However, this is just what economics attempts to do. Hence, environmental economics simply aims to put a dollar value on environmental quality (or degredation). Hence, the entirety of my Labor Economics course was focused on how you place a monetary value on a human life, when the human happens to die because of their job.

So, I tend to agree with you. The whole discipline is of questionable value, so long as economists refuse to accept some very basic truths and incorporate much more than money into their analyses.

JEHR , March 14, 2019 at 12:31 pm

That comment strikes me as strange because one of the weaknesses of classical economic models was the fact that how money works was not part of their inquiry.

The Rev Kev , March 14, 2019 at 4:00 am

In trying to judge the abilities of an expert, the best that most people can do is to see the results on what they practice. If a doctor has a reputation of getting his patients drug-addicted, then you would not go to them. If an engineer built a building but the roof constantly leaked, you would think twice about giving them another contract. But let us think about how well economists are judged. You might say that a lot of people in the UK discounted their advice during Brexit but it has been noted that a lot of the Leave campaign was based in depressed areas. Why were so many areas depressed? Because the people knew that the government was using the advice of economists as to which areas to prioritize for resources. And usually that meant London and its outer areas – which voted Remain.
People are fully aware of what happens too when WTO economists go into a country – social services are cut, public transport is cut way back, the cost of living for the poor skyrocket while the rich seem to be protected. And take a look at the economic state of the United States. Wages have flatlined since the 70s, infrastructure is falling into disrepair, whole swathes of the country are abandoned to their own devices, de-industrialisation is a fact, etc, etc etc but the point is that the people that were giving all the advice to have this done were economists like Ken Rogoff and his wonky austerity study. It may have been the politicians that pulled the trigger but it was economists that were loading the gun.
if you want a breed of economists more grounded in reality, then I would suggest having them work in a fulfillment center for a week to show the the consequences of what happens when you get priorities wrong. Certainly they need to study the work of economists like Hyman Minsky and Susan Strange who had gone out of fashion before the crash but the long and short of it is to see what works and what does not work. I do not mean to be insulting here but as far as I can see, modern economic theory has really been a theory for the top 20% and not for the rest of the population. And now we are seeing the result up close and personal and until this changes, people will not feel the need to take the advice of economist, even when they should. Martin Wolf is fortunate in having also a humanities background but how true is that nowadays?

Jos Oskam , March 14, 2019 at 4:04 am

The sentence " So, maybe the proper distinction to be made is between "trustworthy" experts and "untrustworthy" ones " is important. Unfortunately, in the article I miss a key aspect in making that distinction.

I seem to notice that the "trustworthy" areas of expertise in general tend to be removed from political ideas or preferences. Left or right, liberal or conservative, democrat or republican, it does not affect the way in which trustworthy experts go about their business. It does not influence the way in which a doctor cures patients, a pilot flies a plane or an engineer constructs a bridge. However, as soon as we start discussing things like the economy, talk is full of "liberal" or "left" economists as opposed to "conservative" or "right" economics. I have never heard of one bridge being more at risk of collapse because it was designed by a liberal engineer versus a conservative one, or the other way round. When discussing the strength of a bridge political leanings simply do not come into play, it is not a factor like the strength of the steel used. But for all economic debate, these leanings often seem to be the essence of the discussion.

Given the general public's intensifying distrust of politicians and all things political, it does not surprise me that disciplines tainted by political colouring (like economics) are considered "untrustworthy" compared to disciplines where political colouring is not a factor (like the aforementioned doctors, pilots and engineers).

Since economics *is* in fact very interwoven with politics, I think the general public will always treat economists the same way they treat politicians, that is with a healthy dose of distrust. And who can blame them?

Ptb , March 14, 2019 at 9:07 am

Yes, ability vs integrity.
And you can take 10 of the most honest and well meaning people, dedicated to the public good and advancement of learning, employ them in a structure set up to profit first and ask questions second, and the whole is going to be not the same as the sum of the parts.

bruce wilder , March 14, 2019 at 10:45 am

I'd say an unhealthy dose of distrust is more likely and more common.

People tend to treat conventional econospeak as so much blah, blah, blah and then turn around and credit or discredit what has been said on the basis of the tone with which it was said.

Economists working for the kleptocracy get a lot of mileage out of sounding serious, while talking complete rubbish. And, sadly, many economists working the left, get away with lame one-liners and a rudderless iconoclasm.

SJ , March 14, 2019 at 4:32 am

I had an e-mail exchange with Mr. Wolf many years ago – before the 2008 crash – where he basically told me that we live in the best of all possible worlds and that nothing needs to change – he has changed his tune since then, I suppose to try to avoid looking like a complete idiot and also to try to deflect criticism on to others. Maybe he has öearned something in the meantime, but maybe he is just faking for the sake of appearences.

deplorado , March 14, 2019 at 11:02 am

I think he is faking it. It's the party line. It is the beginning of the neoliberal Perestroika (see also Brad DeLong).

I quite like to look at it this way – it is very clarifying (as I lived in the Perestroika) and I recommend it. Don't for a moment trust the Perestroika – it is half-measures at best and purposeful deception at worst.

johnf , March 14, 2019 at 5:24 am

" The answer should not be to produce apprentices in a highly technical and narrow discipline taught as a branch of applied mathematics ." With apologies to Mr. Richter, economics is taught more like a branch of mathematical sophistry, and that is slighting the original sophists.

I was an undergraduate studying applied mathematics at the time and place, present day neoclassical economics was being developed, published and starting to be taught. I can think of just one economics-and-finance classmate who continued to study mathematics beyond first year calculus – which everyone had to take.

Our introductory numerical analysis professor was scathing about his colleagues at the other side of the Quads. He made it quite plain that we could not skip the rigor and "try to prove something like an economist". Pretty much all the econ students dropped his course when they discovered that. The specific problem they could not address, can be simply stated. If you know a number but don't know its error, you don't know the number. The difficulty the great mass of economists have with just that, excludes economics as a branch of applied mathematics.

bruce wilder , March 14, 2019 at 10:50 am

interesting insight

pretty much the sum total of neoclassical economics is trying to work out the counterfactual of how the economy would work if everyone had more-or-less complete information to work with.

introduce genuine uncertainty, and pretty much the whole apparatus turns topsy-turvy and all the "laws" of economics disappear or become highly contingent on circumstances unlikely to obtain.

Thuto , March 14, 2019 at 5:40 am

"Fixing" economics must start with a wholesale divestment from the idea of this profession being a "science", said divestment openly promoted by economists themselves. All manner of hardwired, warped thinking, to say nothing of obstinacy in changing one's views when confronted with contradictory evidence, results from people believing that they're scientists practising a real science. When such thinking seeps into the subconscious, the obstinacy is locked into place and even events of the scale of the GFC aren't enough to shake loose the erroneous biases held by the mainstream profession.

How else would an entire profession place so much faith in the predictive powers of its models if not having such faith resting on a (supposed) firm foundation of science? An engineer designing a beam for a bridge has justifiable faith in continuum mechanics (a real science) as a sound foundation for their work, economics is devoid of such sound foundations and its time the profession loudly and publicly declared this in an unprecedented act of intellectual honesty.

Additionally, we see weak to non-existent culpability enforcement when policy recommendations put on the table by economists wreck lives (as they have over decades), this in stark contrast with e.g. an engineer designing a bridge that collapses and kills hundreds. In other words, economists have outsized influence in matters of policy out of proportion with the amount of actual skin they have in the game. On the other side, this "economics is a science" narrative disarms a public already deficient in the marginal capacity for independent, critical thinking to question anything economists say, said public including politicians who, as aptly put by the Rev Kev, pull the trigger of a policy gun loaded by economists.

cnchal , March 14, 2019 at 8:50 am

>. . . economics is devoid of such sound foundations and its time the profession loudly and publicly declared this in an unprecedented act of intellectual honesty.

Not one economist, with their ass planted firmly on their throne at the policy table, will admit to that. The operating principle is venality.

Now that they have lost the respect of the peasants, I don't want them to matter again. What I would like to see is mass firings of eclownomists, so they can experience life as lived by the peasants, just once. It may even free up resources to pay people to actually do good things instead of perpetuating one failure after another, and being grossly rewarded for those failures.

dearieme , March 14, 2019 at 6:35 am

I think he gets the wrong end of the stick here: "Consider the anti-vaccination movement, hostility to evolutionary theory, or rejection of climate science."

No doubt there are occasions when vaccinations can do serious harm: a niece of mine was excused a standard vaccination because of a contra-indication in her family medical history.The anti-vaxers, though, seem to have elevated some small kernel of truth into a stupid all-encompassing doctrine without giving the matter enough critical thought.

The anti-evolutionists seem to have failed to devote any critical thought to the matter at all.

But the sceptics about "climate science" have deployed critical thinking to identify this new religion as being composed largely of incompetence, dishonesty, and hysteria. It's the likes of old Wolfie who are lacking in critical thought on this issue. Maybe he's one of those people who is uneducated in science, and so too easily swayed by chaps shouting excitedly about models, measurements, and so forth.

It's very odd. Goebbels Warming is now old enough that you can check the historical record of its predictions of dreadful tipping points, of the disappearance of snow from Britain, of the flooding of this and that Pacific island group, and so on. All false. So why should anyone rational believe a word of it? After all, almost from the beginning its proponents believed that the science was settled – it was inarguable. In which case why have their predictions proved so lousy?

Consult a poet: humankind cannot bear very much reality.
Consult an economist: incentives matter.

mle detroit , March 14, 2019 at 8:01 am

Dearie me, Dearieme, your comment appears to lack sources, citations, examples. Please provide.

Steve Ruis , March 14, 2019 at 8:38 am

So, Yves, you are saying ("Economists are the only social scientists to have a seat at the policy table," etc.) that economists are like weathermen. They still have a time slot on the evening news and are respected, even though their accuracy is abysmal. They make a lot of money doing this.

Basically, this is because we expect very little of economists and because they have stopped using ordinary language professionally, they have the status equivalent to someone actually helpful.

I think economics has become an asocial science with too many economists willing to provide some sort of academic cover for whatever the plutocrats want to do.

Arthur Dent , March 14, 2019 at 11:24 am

I think the analogy to meteorologists is interesting. As an engineer, I have some perspective on this.

In engineering design, frequent failure of what we design is generally undesirable. So we have our analytical tools based on both scientific theory and empirical data, and then apply a factor of safety (sometimes called factor of ignorance, but more accurately is a recognition that there is a probabilistic distribution of outcomes and the factors of safety shift the design towards success instead of high probability of failure).

Airline pilots operate similar to engineers in that they aren't flying close to the edge of the airplane's flight characteristics. Instead they stay in a zone quite a ways away from what the airplane could potentially do. This is one of the reasons that airplane travel is very safe, especially compared to car travel.

Meteorologists are trying to make predictions of the most likely scenario which means they are trying to hit the center of the distribution of the potential outcomes. As a results,